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 Cost Method, what effect would the above information have on GNR's investment in NMX account?

Question

Quizplus · Accepted Answer

The cost method only records the cost of the investment and any dividends received as income. There is no adjustment for net income earned by the investee, so GNR's investment in NMX account would not be affected by the information given.

GNR Inc Owns 100% of NMX Inc