When a Company Holds Between 20% and 50% of the Outstanding

question 21

Multiple Choice

When a company holds between 20% and 50% of the outstanding ordinary shares of an investee, which of the following statements applies?

• A)The investor should always use the equity method to account for its investment.
• B)The investor should use the equity method to account for its investment unless circum-stances indicate that it is unable to exercise "significant influence" over the investee.
• C)The investor must use the fair value method unless it can clearly demonstrate the ability to exercise "significant influence" over the investee.
• D)The investor should always use the fair value method to account for its investment.

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Definitions:

Minimum Wage

The lowest legal salary that employers can pay to workers, established by government legislation.

Right-to-Work Laws

Legislation that prohibits union security agreements, ensuring that employment is not affected by membership or non-membership in a labor union.

Collective Bargaining

A process of negotiation between employers and a group of employees aimed at agreeing on working conditions, wages, and benefits.

Minimum Wage

The lowest legal salary that employers can pay their employees.