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, 20X4 for $42 per share. Phillips' intent is to keep these shares beyond the current year. On December 20, 20X4, Martin paid a $4,000,000 cash dividend. On December 31, Martin's stock was trading at $45 per share and their reported 20X4 net income was $52 million. What effect will the dividend have on Phillips' 20X0 financial statements?

A) It would increase cash and increase investment income.
B) It would increase cash and decrease investment in associated companies.
C) It would increase cash and increase net unrealized gains/losses.
D) It would increase cash and increase the allowance to value at market account.