Randall Company Acquired 40% of the Voting Stock of Boulder

question 20

Multiple Choice

Randall 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 Randall Company's investment in Boulder Company is $44 million.What accounts on Randall Company's books would be affected by the dividends of Boulder Company?

• A) none
• B) Cash increase $2 million and Investment Revenue increases $2 million
• C) Cash increase $5 million and Investment Revenue increases $5 million
• D) Cash increase $2 million and Investments decrease $2 million

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Definitions:

Revenue

The income generated from normal business operations and includes discounts and deductions for returned merchandise.

Freemium Revenue Model

A business strategy where basic services are provided free of charge while more advanced features must be paid for.

Utility And Usage Revenue Model

A business model where customers pay based on their usage of a service or product, emphasizing the utility value derived from using the product.

Fees

Charges imposed by service providers on consumers for the services offered.