When Is the Equity Method Used to Account for Long-Term

question 57

Multiple Choice

When is the equity method used to account for long-term investments in common stock?

• A) When the investment is between 20% and 50% of the voting stock, regardless of whether or not significant influence can be achieved.
• B) When the investment is greater than 50% of the voting stock, regardless of whether or not significant influence can be achieved.
• C)When the investment is greater than 50% of the voting stock and significant influence can be achieved.
• D)When the investment is between 20% and 50% of the voting stock and significant influence can be achieveD.The investment must be between 20% and 50% of the voting stock and significant influence must be achieved.

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Definitions:

Marginal Utility

The added satisfaction or usefulness obtained from using one more unit of a product or service.

Total Utility

The total satisfaction or benefit received by consuming a particular quantity of a good or service.

Price Ratio

The relative price of one good or service compared to another, often indicating how many units of one good can be exchanged for one unit of another.

Price

The monetary value anticipated, needed, or dispensed for acquiring something.