When an Investor Owns Between 20% and 50% of the Ordinary

question 110

Multiple Choice

When an investor owns between 20% and 50% of the ordinary shares of a corporation, it is generally presumed that the investor

• A) has insignificant influence on the investee and that the cost method should be used to account for the investment.
• B) should apply the cost method in accounting for the investment.
• C) will prepare consolidated financial statements.
• D) has significant influence on the investee and that the equity method should be used to account for the investment.

---

Definitions:

Grice's Maxim

Principles proposed by philosopher H.P. Grice to outline how effective communication relies on cooperativeness and adherence to certain conversational norms.

Quantity

Quantity refers to a measurable amount or number of items.

Quality

The standard of something as measured against other things of a similar kind; the degree of excellence of something.

Relation

The way in which two or more concepts, objects, or people are connected.