The Equity Method Should Generally Be Used to Account for an Investment

question 98

Multiple Choice

The equity method should generally be used to account for an investment in stock when the level of ownership is

• A) less than 10%.
• B) between 10% and 20%.
• C) between 20% and 50%.
• D) 10% or more.

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Definitions:

Current Liability

Financial obligations a company is required to pay within a year.

Product Warranty Expense

Costs associated with repairing or replacing defective products under warranty.

Replacement Warranty

A guarantee provided to a purchaser of a product that a defective item will be replaced within a specified period of time.

Unfunded Pension Liability

A pension obligation for which sufficient assets have not been set aside, representing a potential future liability for the employer.