Brian Company purchased 10% of the outstanding shares of Wilson Company.Brian Company classifies the investments as trading securities.At the end of the year,the market value of the shares increased.The increase in market value of Wilson Company's shares will affect Brian Company by ________.
A)increasing cash and increasing investments
B)decreasing investments and increasing stockholders' equity
C)increasing investments and increasing stockholders' equity
D)increasing cash and increasing stockholders' equity

Question

Quizplus · Accepted Answer

As per the question, Brian Company classifies the investment as trading securities, therefore any increase in the market value of the shares will affect the company by increasing its investments and increasing stockholders' equity. There will be no direct impact on cash as the shares haven't been sold yet. Therefore, option C is the correct answer.

Brian Company Purchased 10% of the Outstanding Shares of Wilson