A Company That Owns Between 20% and 50% of the Common

question 13

Multiple Choice

A company that owns between 20% and 50% of the common stock of another business recognizes revenue from the investment when:

• A)the company sells the shares in the investee company.
• B)the investee company recognizes net income.
• C)the company receives a cash dividend from the investee company.
• D)any of the above occur.

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Definitions:

Accounting Equation

The fundamental principle of accounting that states assets are equal to the sum of liabilities and owner's equity.

Creditor

An individual or institution to whom money is owed by the debtor or the borrower.

Cash Investment

Cash investment refers to funds invested into a business or market with the expectation of generating a financial return.

Accounting Equation

Represents the fundamental relationship in accounting: Assets = Liabilities + Equity, ensuring a balance in a company's financial statements.