Pepper Company Owns 40% of the Common Stock and Exercises

question 125

Multiple Choice

Pepper Company owns 40% of the common stock and exercises significant influence over Salt Company.Pepper Company ________.

• A)would increase its investment account when Salt Company declares dividends
• B)would record 40% of the net income of Salt Company as investment income each year
• C)would record dividends received from Salt Company as investment revenue
• D)would file a consolidated financial statement with Salt Company

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Definitions:

Common Stock

An equity ownership interest in a corporation, typically giving holders voting rights and a share in the company's profits via dividends.

Retained Earnings

Retained earnings refer to the portion of net income that is kept by a company to reinvest in its business or pay down debt, instead of being distributed to shareholders as dividends.

Dividends

Disbursements issued by a company to its stockholders, typically sourced from the enterprise's earnings.

FOB Destination

A shipping term indicating the seller is responsible for the goods until they reach the buyer's specified location.