Question
ABC has an investment equal to 30% of the voting shares of XYZ. In 2022, XYZ reported net income of $400,000 and paid dividends of
ABC has an investment equal to 30% of the voting shares of XYZ. In 2022, XYZ reported net income of $400,000 and paid dividends of $80,000. What is the effect of this information on ABC's Income and Expenses and Cash Flow statements? Ignore taxes.
a. The net income and statement of cash flows increase by $24,000 each.
b. Both net income and statement of cash flows increase by $120,000 each.
c. Net income is not affected and the statement of cash flows is increased by $24,000.
d. Net income increases by $120,000 and the statement of cash flows increases by $24,000
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