John Company Purchased Common Stock in Garcia Company

Multiple Choice

John Company purchased common stock in Garcia Company.John Company treats the investment as available-for-sale securities.During the current year,Garcia Company earned $4,000,000 and paid dividends of $1,000,000.Assume that John Company owns 10% of the outstanding shares of Garcia Company.Garcia Company's net income will affect John Company in which of the following ways?

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