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:

Punishment

A consequence or penalty given for a perceived misbehavior or infringement, intended to reduce or eliminate that behavior.

Unpleasant Event

An occurrence that is undesirable or causes discomfort.

Decreasing

Refers to a reduction in size, quantity, or extent of something over a period.

Frequency

The rate at which a particular event or phenomenon occurs over a certain period or within a given sample.