The following information pertains to questions
GNR Inc owns 100% of NMX Inc.During the year,NMX Inc earned a net income of $40,000 and paid Dividends of $10,000.
-Assuming once again that GNR owned 80% of NXR instead of 100%,what would be the effect on GNR's investment in NMX account under the cost method if GNR received $9,000 in dividends from NMX?
A)An increase of $1,000.
B)No effect
C)A decrease of $1,000.
D)An increase of $23,000.

Question

The following information pertains to questions 
GNR Inc owns 100% of NMX Inc.During the year,NMX Inc earned a net income of $40,000 and paid Dividends of $10,000.
-Assuming once again that GNR owned 80% of NXR instead of 100%,what would be the effect on GNR's investment in NMX account under the cost method if GNR received $9,000 in dividends from NMX?
A)An increase of $1,000.
B)No effect
C)A decrease of $1,000.
D)An increase of $23,000.

Quizplus · Accepted Answer

Under the cost method, dividends received are considered as income and do not affect the investment account. Therefore, receiving $9,000 in dividends would have no effect on GNR's investment in NMX account.

The Following Information Pertains to Questions