If Pop Company Exercises Significant Influence Over Son Company and Owns

question 162

Multiple Choice

If Pop Company exercises significant influence over Son Company and owns 40% of its common stock, then Pop Company:

• A) Would record dividends received from Son Company as investment revenue.
• B) Would increase its investment account when Son Company declares dividends.
• C) Would record 40% of the net income of Son Company as investment income each year.
• D) All of these answer choices are correct.

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Definitions:

FIFO

"First In, First Out," an inventory valuation method where goods first bought are the first ones sold, assuming their cost flows in the order incurred.

Gross Profit

The difference between sales revenue and cost of goods sold, indicating how effectively a company generates profit from direct expenses.

Inventory Cost Formula

A method used to determine the cost of an inventory item, including methods such as First-In, First-Out (FIFO), Last-In, First-Out (LIFO), and average cost.

Management

The process of planning, organizing, leading, and controlling an organization's resources to achieve specific goals.