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GNR Inc owns 100% of NMX Inc.During the year,NMX Inc earned a net income of $40,000 and paid Dividends of $10,000.
-Assuming that GNR Inc uses the Equity Method,what effect would the above information have on GNR's investment in NMX account?
A)An increase of $30,000.
B)An increase of $40,000.
C)An increase of $10,000
D)No effect.

Question

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GNR Inc owns 100% of NMX Inc.During the year,NMX Inc earned a net income of $40,000 and paid Dividends of $10,000.
-Assuming that GNR Inc uses the Equity Method,what effect would the above information have on GNR's investment in NMX account?
A)An increase of $30,000.
B)An increase of $40,000.
C)An increase of $10,000
D)No effect.

Quizplus · Accepted Answer

Under the equity method, GNR Inc would increase its investment in NMX by the net income of $40,000 and decrease it by the dividends received of $10,000, resulting in a net increase of $30,000.

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