If Pop Company owns 15% of the common stock of Son Company, then Pop Company typically:
A) Would record 15% of the net income of Son Company as investment income each year.
B) Would record dividends received from Son Company as investment revenue.
C) Would increase its investment account by 15% of Son Company income each year.
D) All of these answer choices are correct.

Question

Quizplus · Accepted Answer

Pop Company would record dividends received from Son Company as investment revenue. The amount of net income it would record would depend on whether it has significant influence or control over Son Company. If it has significant influence, it would record its share of the net income using the equity method. If it has control, it would consolidate Son Company's financial statements with its own. Option A and C are incorrect as they assume Pop Company has significant influence or control over Son Company, which is not explicitly stated in the question.

If Pop Company Owns 15% of the Common Stock of Son