Phillips Corporation Purchased 1,000,000 Shares of Martin Corporation's Common Stock

Multiple Choice

Phillips Corporation purchased 1,000,000 shares of Martin Corporation's common stock which constitutes 10% of Martin's voting stock on June 30, 20X0 for $42 per share. Phillips' intent is to keep these shares beyond the current year. On December 20, 20X0, Martin paid a $4,000,000 cash dividend. On December 31, Martin's stock was trading at $45 per share and their reported 20X0 net income was $52 million. What method of accounting will Phillips use to account for this investment?

A) Amortized cost method.
B) Equity method.
C) Fair value method.
D) Consolidation.