Brown company purchased common stock in black company brown

Reference no: EM13605075

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

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

What is the reasoning behind your answer?

Reference no: EM13605075

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