Use of the Consolidated Financial Statement Method of Accounting for a Long-Term

question 33

Multiple Choice

Use of the consolidated financial statement method of accounting for a long-term investment in common stock of another company is required when the ownership of its voting stock is

• A) between 20% and 50%.
• B) 20% or more.
• C) less than 20%.
• D) more than 50%.

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Definitions:

Effective Rate

The total calculated interest on a loan or investment annually, including compounding, differing from the nominal interest rate.

Effective Annualized Rate

The interest rate that is annualized using compounding over a given period, providing a true reflection of the financial cost.

Simple Interest

Interest calculated on the principal portion of a loan or deposit, without compounding over time.

GICs

Guaranteed Investment Certificates, a type of Canadian investment that offers a guaranteed rate of return over a fixed period of time.