Branson Company purchased 40% of the outstanding shares of Missouri 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 Missouri Company's shares will affect Branson Company in which of the following ways?
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 Branson Company owns 40% of Missouri Company, it uses the equity method for accounting. Under this method, changes in market value do not affect the financial statements; only the share of Missouri's earnings and dividends received are recognized.

Branson Company Purchased 40% of the Outstanding Shares of Missouri