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.What accounts on Rocky Company's books would be affected by the net income of Boulder Company?

A) none
B) Investments increase $15 million and Stockholders' equity increases $15 million
C) Cash increases $15 million and Stockholders' equity increases $15 million
D) Investments increase $6 million and Stockholders' equity increases $6 million