Jeff Company Purchased Common Stock of Garcia Company as a Long-Term

question 96

Multiple Choice

Jeff Company purchased common stock of Garcia Company as a long-term investment.During the current year, Garcia Company earned $4,000,000 and paid dividends of $1,000,000.Assume that Jeff Company owns 10% of the outstanding shares of Garcia Company.Garcia Company's dividend will affect Jeff Company by _____.

• A)increasing cash and stockholders' equity by $100,000
• B)increasing investments and stockholders' equity by $100,000
• C)increasing cash and decrease investments by $100,000
• D)none of these answers is correct

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Definitions:

Tennis Rackets

Sporting equipment consisting of a handle and a frame with tightly interlaced strings, used for striking tennis balls.

Balance On Hand

The amount of cash or resources available in an account at any given time.

Units Out

The quantity of products sold or distributed from inventory over a specific time period.

Average Cost Method

An inventory costing method where the cost of goods sold and ending inventory values are determined by calculating the average cost of all similar items in the inventory.