. Blue Dog's net income increases by the amount of the dividends received. Masterfield's net income is unaffected. Because they exert "significant control" (by owning 20% or more, but less than 50% of the other company's stock) they would debit cash (cash increases) and credit the investment account (decreasing that amount). This is what's known as the Equity Method of accounting for dividends.

What is your question? What don't you understand? Where is your solution? Do you just want someone to do your work for you? You would learn nothing that way and it would be a disservice to you. And if you turned in the answer prepared by another person as your own work you would be committing plagiarism which is unethical.

c -- Why is c the correct answer?

It is not appropriate of you to assign your homework to others. To get help you should do the work as well as you can and provide your solution so someone can help you by pointing out where you are wrong and by explaining areas where you show weaknesses.

Blue Dog Corp. holds a 10% equity investment in Del Fuego Inc. Masterfield Investments holds 40% of Del Fuego’s stock.

On April 1, 2010, Del Fuego declares and pays dividends to its stockholders.

How will the dividend affect each company’s net income for the year?

a.

Blue Dog - No effect; Masterfield - Increase

b.

Blue Dog - No effect; Masterfield - No effect

c.

Blue Dog - Increase; Masterfield - No effect

d.

Blue Dog -Increase; Master field - Increase

e.

There is not enough information to determine the effect.