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 are correct.

Question

Quizplus · Accepted Answer

When a company exercises significant influence over another, typically owning 20-50% of its stock, it uses the equity method. Under this method, the investor records its share of the investee's net income as investment income, not dividends received.

If Pop Company Exercises Significant Influence Over Son Company and Owns