Asked by Simer Sidhu on Jun 12, 2024
Verified
An equity investment in less than 20% of another company's stock is accounted for using the cost method.
Equity Investment
Equity investment involves purchasing stocks or shares in a company, providing the investor with ownership interest and potentially dividends.
Cost Method
A method of accounting for equity investments representing less than 20% of the outstanding shares of the investee. The purchase is at original cost, and any gains or losses upon sale are recognized by the difference between the sale proceeds and the original cost.
- Distinguish among the different techniques used in investment accounting.
Verified Answer
FA
Faizan AslamJun 12, 2024
Final Answer :
True
Explanation :
According to Generally Accepted Accounting Principles (GAAP), an equity investment in less than 20% of another company's stock is accounted for using the cost method.
Learning Objectives
- Distinguish among the different techniques used in investment accounting.