Jeff Company Purchased, as a Long-Term Investment, Common Stock of Garcia

Multiple Choice

Jeff Company purchased, as a long-term investment, common stock of Garcia Company.During the current year, Garcia Company earned $4,000,000 and paid dividends of $1,000,000.Assume that Jeff Company owns 10% of the outstanding shares of Garcia Company.Garcia Company's net income will affect Jeff Company by _____.

A) increasing cash and investments by $400,000
B) increasing stockholders' equity and investments by $400,000
C) increasing cash and stockholders' equity by $400,000
D) none of these answers is correct