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.

---

Definitions:

Mixed Branding

A strategy where a company markets products under various brand names, each with a distinct image and demographic appeal.

Product Line Extensions

Introducing additional items in the same product category under the same brand name, often to target a new segment.

MultiBranding

A marketing strategy where a company markets multiple brands in the same product category or sector.

Brand Licensing

The authorization by the licensor to allow a licensee to use a brand's name, logo, or product for a specified period against a fee.