If an Investor Owns Less Than 20% of the Common

question 123

Multiple Choice

If an investor owns less than 20% of the common stock of another corporation as a long-term investment

• A) the equity method of accounting for the investment should be employed.
• B) no dividends can be expected.
• C) it is presumed that the investor has relatively little influence on the investee.
• D) it is presumed that the investor has significant influence on the investee.

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Definitions:

Cost Drivers

Factors that cause the cost of an activity or process to change, which can include the volume of units produced, labor hours, or machine hours.

Vocational School

An educational institution that provides practical and skills-based training aimed at preparing students for specific trades or careers.

Budgets

Financial plans that estimate revenue and expenses over a specified future period of time, often used for planning and controlling financial performance.

Variable Cost Estimates

Projections of costs that vary directly with the level of output or production volume.