Rocky Company Acquired 40% of the Voting Stock of Boulder

Multiple Choice

Rocky 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 Rocky Company's investment in Boulder Company is $44 million.At the time of the acquisition,what accounts would be affected on the books of Rocky Company?

A) Cash decrease $40 million and Investments increase $40 million
B) Cash decrease $40 million and Stockholders' Equity increase $40 million
C) Investments increase $40 million and Accounts Payable increase $40 million
D) No entry