Vanessa Company Purchased Common Stock in Gilmore Company

Multiple Choice

Vanessa Company purchased common stock in Gilmore Company.During the current year,Gilmore Company earned $4,000,000 and paid dividends of $1,000,000.Assume that Vanessa Company owns 40 percent of the outstanding shares of Gilmore Company.Gilmore Company's net income will affect Vanessa Company by ________.

A) increasing investments by $1,600,000
B) increasing investments and cash by $2,000,000
C) increasing cash and stockholders' equity by $400,000
D) increasing cash and decreasing investments by $1,600,000