If a Company Acquires a 40% Common Stock Interest in Another

question 137

Multiple Choice

If a company acquires a 40% common stock interest in another company

• A) the equity method is usually applicable.
• B) all influence is classified as controlling.
• C) the cost method is usually applicable.
• D) the ability to exert significant influence over the activities of the investee does not exist.

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Definitions:

Journal

An accounting record in which transactions are initially recorded in chronological order.

Footing

An accounting term referring to the final total that appears at the bottom of a column of numbers or the process of adding up figures in a column.

Cross-footing

A method used in accounting to check the arithmetic accuracy of accounts by comparing the sums of the totals in the opposite directions.

Special Journals

Special journals are accounting tools used to record specific types of transactions in a more efficient manner, such as sales, purchases, cash receipts, and disbursements.