Rocky Company Acquired 40% of the Voting Stock of Boulder

question 6

Multiple Choice

Rocky Company acquired 40% of the voting stock of Boulder Company for $40 million.At the end of Year 1,Boulder Company reports net income of $15 million and pays cash dividends of $5 million.At the end of Year 1,the market value of Rocky Company's investment in Boulder Company is $44 million.At the time of the acquisition,what accounts would be affected on the books of Rocky Company?

• A)Cash decrease $40 million and Investments increase $40 million
• B)Cash decrease $40 million and Stockholders' Equity increase $40 million
• C)Investments increase $40 million and Accounts Payable increase $40 million
• D)No entry

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Definitions:

Relationship-Motivated Leaders

Leaders who prioritize and are driven by building strong, positive relationships with their team members and stakeholders.

Fiedler's Theory

A theory proposed by Fred Fiedler that suggests the effectiveness of a leader is determined by the match between the leader's style of interacting with subordinates and the degree to which the situation allows the leader to control and influence.

Highly Favorable Situation

An advantageous context or setting that is conducive to success or the achievement of objectives.

Practical Intelligence

The ability to solve everyday problems by utilizing knowledge gained from experience in a way that is suited to the given context.