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

question 104

Multiple Choice

When an investor owns between 20% and 50% of the common stock 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.

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Definitions:

Dissociation

A psychological process where a person disconnects from their thoughts, feelings, memories, or sense of identity.

Reduced Startle Response

A diminished reaction to sudden, unexpected stimuli, potentially indicative of familiarity, desensitization, or neurological conditions.

Compulsion

An irresistible urge to behave in a certain way, especially against one’s conscious wishes.

Phobia

A profound and unreasonable dread or dislike towards a specific thing.