Ramon Company Acquired 40% of the Voting Stock of Boulder

question 32

Multiple Choice

Ramon 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 Ramon Company's investment in Boulder Company is $44 million.What accounts will be affected on Ramon Company's books to account for the increase in market value of the investment at the end of Year 1?

• A) none
• B) Cash increase $44 million and Stockholders' Equity increase $44 million
• C) Investments increase $44 million and Stockholders' Equity increase $44 million
• D) Investments increase $4 million and Stockholders' Equity increase $4 million

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Definitions:

Precipitation

Any type of water, be it in liquid or solid state, which descends from the sky and lands on the Earth's surface, such as rain, snow, sleet, and hail.

Large Grazers

Large herbivorous animals that feed primarily on grass and other low-lying vegetation.

Semiarid Zones

Regions characterized by light rainfall, usually between 10 and 20 inches per year, often resulting in scanty vegetation and a steppe climate.