Bobby 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 increased.The increase in market value of Wilson Company's shares will affect Bobby Company by ________.
A)increasing assets and increasing stockholders' equity
B)decreasing investments and increasing cash
C)increasing investments and increasing stockholders' equity
D)no effect

Question

Quizplus · Accepted Answer

Since Bobby 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.

Bobby Company Purchased 40% of the Outstanding Shares of Wilson