Phillips Corporation Purchased 1,000,000 Shares of Martin Corporation's Common Stock

question 38

Multiple Choice

Phillips Corporation purchased 1,000,000 shares of Martin Corporation's common stock, which constitutes 10% of Martin's voting stock on June 30, 2014 for $42 per share. Phillips' intent is to keep these shares beyond the current year. On December 20, 2014, Martin paid a $4,000,000 cash dividend. On December 31, Martin's stock was trading at $45 per share and their reported 2014 net income was $52 million. What method of accounting will Phillips use to account for this investment?

• A) Amortized cost method.
• B) Equity method.
• C)Fair value method.
• D)Consolidation.

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Definitions:

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The act of continuing to live or exist, especially under challenging conditions or threats.

Contextual Perspective

View of human development that sees the individual as inseparable from the social context.

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Relating to or arising from the natural world and the impact of human activity on its condition.

Interactive

Interactive involves two-way communication or engagement, where participants can influence or respond to each other.