Brian Company Purchased 10% of the Outstanding Shares of Wilson

question 55

Multiple Choice

Brian Company purchased 10% of the outstanding shares of Wilson Company.Brian Company classifies the investments as trading securities.At the end of the year,the market value of the shares increased.The increase in market value of Wilson Company's shares will affect Brian Company by ________.

• A)increasing cash and increasing investments
• B)decreasing investments and increasing stockholders' equity
• C)increasing investments and increasing stockholders' equity
• D)increasing cash and increasing stockholders' equity

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Definitions:

Net Present Values

A method used in capital budgeting to evaluate the profitability of an investment, calculated by subtracting the initial investment from the present value of future cash flows.

Present Value

The contemporary value of future financial inflows or a lump sum, adjusted for a particular rate of return.

Compound Interest

Interest calculated on the initial principal of a deposit or loan, as well as on the accumulated interest of previous periods.

Cash Inflow

The movement of money into an entity, often from operations, investments, and financing, reflecting the increase in cash and cash equivalents.