Asked by Bridger Johnson on Jul 22, 2024
Verified
If 10% of the common stock of an investee company is purchased as a long-term investment the appropriate method of accounting for the investment is
A) the cost method.
B) the equity method.
C) the preparation of consolidated financial statements.
D) determined by agreement with whomever owns the remaining 90% of the stock.
Common Stock
Equity ownership in a corporation, representing a claim on its earnings and assets, and conferring voting rights in certain corporate decisions.
Cost Method
This accounting approach involves recording an investment at its original cost without adjusting for changes in market value.
Equity Method
An accounting technique used to record investments in other companies where the investor has significant influence but does not have full control.
- Select the proper accounting strategy, cost or equity, based on the amount of ownership and influence exerted.
Verified Answer
Learning Objectives
- Select the proper accounting strategy, cost or equity, based on the amount of ownership and influence exerted.
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