Vince Company Purchased Common Stock of Gill Company as a Long-Term

Multiple Choice

Vince Company purchased common stock of Gill Company as a long-term investment.During the current year, Gill Company earned $4,000,000 and paid dividends of $1,000,000.Assume that Vince Company owns 40% of Gill Company.Gill Company's net income will affect Vince Company by _____.

A) increasing investments by $1,600,000
B) increasing cash and stockholders' equity $400,000
C) increasing cash and investments by $2,000,000
D) having no effect