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:

Beginning Inventory

The value of all the inventory held by a company at the start of an accounting period, used to calculate the cost of goods sold.

Net Purchases

The total amount of purchases made by a business after subtracting returns, allowances, and discounts.

Net Purchases

Net Purchases refers to the total amount of purchases made by a company after subtracting any returns, allowances, and discounts received.

Ending Inventory

is the total value of goods available for sale at the end of an accounting period after accounting for all additions and subtractions during the period.