Phillips Corporation purchased 1,000,000 shares of Martin Corporation's common stock,which constitutes 10% of Martin's voting stock on June 30,2019 for $42 per share.Phillips' intent is to keep these shares beyond the current year.On December 20,2019,Martin paid a $4,000,000 cash dividend.On December 31,Martin's stock was trading at $45 per share and Martin reported 2019 net income of $52 million.
- What effect will the dividend have on Phillips' 2019 financial statements?

Question

Quizplus · Accepted Answer

Phillips Corporation would record the $4,000,000 cash dividend received from Martin Corporation as an increase in cash and an increase in investment income on its financial statements for 2019.

Phillips Corporation Purchased 1,000,000 Shares of Martin Corporation's Common Stock,which