When a Company Has Acquired a "Passive Interest" in Another

question 54

Multiple Choice

When a company has acquired a "passive interest" in another corporation, the acquiring company should account for the investment

• A) by using the equity method.
• B) by using the fair value method.
• C) by using the effective interest method.
• D) by consolidation.

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Definitions:

Legally Married

The official union of two individuals recognized by law, entitling them to certain rights, benefits, and obligations.

Paternity Suit

A lawsuit brought by an unmarried mother to establish that a certain person is the biological father of her child. DNA testing or a comparable procedure is often used to determine paternity.

Foster Care

A temporary arrangement in which a family is paid by the state to care for a child for a limited period of time, often pending adoption.

Temporary Arrangement

A provisional setup intended to serve a purpose for a limited period before a permanent solution is established.