A Company That Owns 40% of the Common Stock of Another

question 3

Multiple Choice

A company that owns 40% of the common stock of another business recognizes revenue from the investment when:

• A)the investor sells the shares in the investee company.
• B)the investee issues a cash dividend.
• C)the investee recognizes net income.
• D)the investee issues a stock dividend.

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Definitions:

Surplus

A situation where the quantity of a product or service supplied exceeds the quantity demanded at the current price.

Binding Price Floor

An enforced price limit by authorities that prevents prices from falling below a certain level, causing excess supply.

Surplus

A situation where the quantity supplied of a good exceeds the quantity demanded, often leading to a decrease in prices.

Market

A market is a venue where buyers and sellers meet to exchange goods, services, or financial instruments. It can be physical or virtual.