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

Question

Quizplus · Accepted Answer

When the investee recognizes net income, the company that owns 40% of the common stock will recognize its share of the net income as revenue. This is because the percentage of ownership entitles the company to a proportionate share of the earnings of the investee. The other options, such as selling the shares, receiving dividends or stock dividends, do not directly result in revenue recognition for the investing company.

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