Homework Answers
Answer: C. would decrease its investment account when Salt Company declares dividends
Explanation:
Percentage of holding is 40%. It has significant impact. So, Pepper company uses 'Cost method'.
A. In Consolidated method, Pepper company file a consolidated financial statement with salt company
B. In Fair value method, Pepper company would record dividends received from salt company as investment revenue
C. In Cost method, Pepper company would decrease its investment account when Salt Company declares dividends
D. Pepper company would not record goodwill as investment income each year in Cost method.
Since, Pepper company follows Cost method, Option C is correct.
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