Jeff Company purchased common stock of Garcia Company as a long-term investment.During the current year, Garcia Company earned $4,000,000 and paid dividends of $1,000,000.Assume that Jeff Company owns 10% of the outstanding shares of Garcia Company.Garcia Company's dividend will affect Jeff Company by _____.
A)increasing cash and stockholders' equity by $100,000
B)increasing investments and stockholders' equity by $100,000
C)increasing cash and decrease investments by $100,000
D)none of these answers is correct

Question

Quizplus · Accepted Answer

Jeff Company owns 10% of Garcia Company and would receive 10% of the dividends paid, which is $100,000 ($1,000,000 * 10%). This increases Jeff Company's cash and stockholders' equity by $100,000.

Jeff Company Purchased Common Stock of Garcia Company as a Long-Term