Benjamin Investments purchased 40 of the common stock of Sad

Benjamin Investments purchased 40% of the common stock of Sadie Corporation on March 1, 2014. Sadie Corporation reports a net income of $675,000 for the 2015 year. Based on the information provided, which of the following is true of the balance sheet on December 31, 2015? A) Total assets will remain unchanged. B) Total liabilities will decrease. C) Total equity will increase. D) Cash will increase.

Solution

A) Total assets will remains unchanged, because there is an investment which is done by cash therefore, there is decrease in cash but increase in investment, once the asset is decreased with an amount with which same amount, the investments are increased. Therefore, there will be no change in asset.