Asked by
Indira Beresford
on Oct 16, 2024
Verified
GNR Inc. owns 100% of NMX Inc. During the year, NMX Inc. earned a net income of $40,000 and paid dividends of $10,000. Assuming that GNR Inc. uses the cost method, what effect would the above information have on GNR's investment in NMX account?
A) An increase of $10,000
B) An increase of $30,000
C) An increase of $40,000
D) No effect.
Cost Method
An accounting method used to record investments, where the investment is recorded at its acquisition cost without adjusting for changes in market value.
Investment Account
An Investment Account is a financial account held by an investor with a brokerage firm, bank, or custodian that holds securities and other investments.
Net Income
The total profit of a company after all expenses and taxes have been deducted from revenue.
- Identify the differences between the investment accounting methods of cost and equity.
Verified Answer
KC
Learning Objectives
- Identify the differences between the investment accounting methods of cost and equity.