If One Company Owns More Than 50% of the Common

question 110

Multiple Choice

If one company owns more than 50% of the common stock of another company

• A) the cost method should be used to account for the investment.
• B) a partnership exists.
• C) a parent-subsidiary relationship exists.
• D) the company whose stock is owned must be liquidated.

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Definitions:

Per-Unit Costs

The expense incurred to produce, acquire, or sell one unit of a product or service, used in calculating profitability and pricing strategies.

Fixed Costs

Costs that do not vary with the volume of production or sales, such as rent, salaries, and insurance.

Semiconductors

Semiconductors are materials, such as silicon, which have electrical conductivity between that of a conductor and an insulator, used in a vast array of electronic circuits and devices.

Manufacturing Technologies

Innovations and methods in the manufacturing process that improve efficiency, productivity, and product quality.