Photo Finish Corporation Bought a 40% Interest in the Voting

question 49

Multiple Choice

Photo Finish Corporation bought a 40% interest in the voting stock of Click It Corporation's $1 par value common stock for $20 million (2 million shares at a $10 market price) on March 31, 20X4. On December 31, 20X4, Click It paid a $1 million cash dividend declared earlier in 20X4 and reported net earnings for the year ended 20X4 of $10 million. On December 31, 20X4, Click Its stock was trading at $11.50 per share.
-What effect will the dividend have on Photo Finish's financial statements?

• A) It would increase cash and increase investment income.
• B) It would increase cash and decrease investment in Click It.
• C) It would increase cash and increase net unrealized gains/losses.
• D) It would increase cash and increase the allowance to value at market account.

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Definitions:

Magnification

The process of enlarging the appearance of an object as viewed through an optical instrument like a microscope or telescope.

Microscope Stage

The platform on a microscope where the specimen is placed for examination.

Focusing

The act of directing one's attention or vision towards something specific.