Brian Company purchased 40% of the outstanding shares of Wilson Company as a long-term investment.At the end of the year the market value of the shares had increased. The increase in market value of Wilson Company shares will affect Brian Company by_____.
A)increasing assets and stockholders' equity
B)increasing stockholders' equity and investments
C)increasing investments and cash
D)having no effect

Question

Quizplus · Accepted Answer

Since Brian Company owns 40% of Wilson Company, it likely uses the equity method for accounting. Under the equity method, changes in market value do not affect the financial statements; instead, the investment is adjusted for Brian's share of Wilson's earnings and dividends.

Brian Company Purchased 40% of the Outstanding Shares of Wilson