When Is the Equity Method Not Used to Account for Long-Term

question 10

Multiple Choice

When is the equity method not used to account for long-term investments in stocks?

• A) When the investment is 15% and significant influence can be achieved.
• B) When the investment is 30% of the voting stock and significant influence can be achieved.
• C) When the investment is greater than 50% of the voting stock and control is achieved.
• D) When the investment is 40% of the voting stock and significant influence can be achieved.

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Definitions:

Direct Labor-Hour

A metric indicating the total hours worked by employees directly involved in the production process, often used for costing purposes.

Labor Rate

The amount paid to an employee per unit of time, usually per hour or year.

Direct Materials Purchase Budget

A financial plan that estimates the quantities and costs of direct materials to be purchased to meet production requirements.

Ending Inventories

Ending inventories refer to the final amount of goods available for sale or use at the end of an accounting period.