Robert Company acquired 40% of the voting stock of Boulder Company for $40 million.At the end of Year 1,Boulder Company reports net income of $15 million and pays cash dividends of $5 million.At the end of Year 1,the market value of Robert Company's investment in Boulder Company is $44 million.What accounts on Robert Company's books would be affected by the net income of Boulder Company?
A) none
B) Investments increase $15 million and Investment Revenue increases $15 million
C) Cash increases $15 million and Investment Revenue increases $15 million
D) Investments increase $6 million and Investment Revenue increases $6 million

Question

Quizplus · Accepted Answer

Robert Company's share of Boulder Company's net income would be 40% of $15 million, which is $6 million. This increases the Investments account and is recognized as Investment Revenue.

Robert Company Acquired 40% of the Voting Stock of Boulder