ABC Company Owns 75% of XYZ Company

question 43

Multiple Choice

ABC Company owns 75% of XYZ Company. During 2012, XYZ Company declared and paid $5,000 in dividends. What impact did this transaction have on the separate financial statements of ABC Company?

• A)Total assets were increased
• B)Net income was decreased.
• C)Investment account for XYZ Company was decreased.
• D)All of the above.

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Definitions:

Call Option

An economic agreement allowing the buyer the choice, yet not mandating, to purchase an asset at an agreed-upon price within a designated duration.

Option

A financial derivative that gives the buyer the right, but not the obligation, to buy or sell an underlying asset at a specified price on or before a specified date.