If an Investor Owns Less Than 50 Percent of an Investee's

question 10

True/False

If an investor owns less than 50 percent of an investee's voting shares, the equity method should always be used to account for the investment.

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Definitions:

Cash Dividend

A distribution of earnings given by a company to its stockholders, often as a share of profits.

Balance Sheet

A financial statement that provides a snapshot of a company’s financial condition at a specific moment in time, showing assets, liabilities, and shareholders' equity.

Direct Method

A cost allocation method that assigns all costs directly to cost objects without going through intermediate cost pools.

Prepaid Expense

Payments made in advance for goods or services that will be received in the future.