If One Company Owns More Than 50% of the Common

question 10

Multiple Choice

If one company owns more than 50% of the common shares 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 shares are owned must be liquidated.

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Definitions:

Organizational Structure

The system of hierarchy and arrangement within a company that outlines roles, responsibilities, and relationships between individuals and groups.

Types of Stock

Refers to the different categories of stock that a company issues, commonly including common stock and preferred stock.

Stockholder

An individual or entity that owns shares in a corporation, thus holding a portion of the corporation's equity.

Company's Assets

This encompasses all items of value owned by a company, including cash, real estate, equipment, and intellectual property, which are utilized in generating revenue.