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Dahal Corp. holds a 12% equity interest in Garbarini Access, Inc. Nguyen Holdings Corp. holds 40%...

Dahal Corp. holds a 12% equity interest in Garbarini Access, Inc. Nguyen Holdings Corp. holds 40% of Garbarini Access shares. On April 1, 2011, Garbarini declares and distibutes a cash dividend to its stockholders that is a result of current earnings. How will the receipt of those dividends affect each company's balance sheet account: Equity Investment Garbarini Access, Inc.

Dahal Corp

Nguyen Holdings
a)No effect Decrease
b)Increase   Decrease
c)No effect No effect
d)Decrease Increase
Business   Accounting   
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Answer #1

Garbaarini Access pays dividens to all its stakeholders. Nguyen Holdings is one of the comapny which holds 40% of Garbarini Access shares. Hence the company will receive dividend and teher will be an increase in the company's balance sheet

On the other hand Dahal Corp holds a12% equity interest and any change in the Garbini Access balance sheet will eb directly effected to Their company. In this case when Garbini decidede to pay dividend there will be decline in teh retained earning and similarly Dahal Corp will observe a decline in the balance sheet

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