If 10% of the Common Stock of an Investee Company

question 173

Multiple Choice

If 10% of the common stock of an investee company is purchased as a long-term investment the appropriate method of accounting for the investment is

• A) the cost method.
• B) the equity method.
• C) the preparation of consolidated financial statements.
• D) determined by agreement with whomever owns the remaining 90% of the stock.

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Definitions:

Speed Increasing

The process of accelerating or increasing the rate of motion or activity.

Transmission Tailshaft

The rear section of a vehicle's transmission, connecting to the driveshaft, that transfers power from the transmission to the wheels.

Mating Gear

Refers to a gear that engages with another gear to transmit force and motion in mechanical systems.

Climbing

A gear problem caused by excessive wear in intermeshing gears or bearings. Climbing occurs when intermeshing gears move apart sufficiently for one gear to climb over the apex of its mate.