Bela Ltd Has Invested in Several Domestic Manufacturing Corporations

question 12

Multiple Choice

Bela Ltd. has invested in several domestic manufacturing corporations. Which of the following investments would most likely be accounted for under the equity method on Bela's financial statements?

• A)A holding of 15,000 of the 50,000 outstanding common shares of Earthwise Co.
• B)A holding of 3,000 of the 10,000 outstanding preferred shares of Earthbent Co.
• C)A holding of 5,000 of the 60,000 outstanding common shares of Earth-Kind Co.
• D)A holding of 20,000 of the 25,000 outstanding common shares of Earth-Clean Co.

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Definitions:

Synergistic Benefits

The advantages or positive outcomes that arise when two or more entities (such as companies or processes) combine or interact, leading to a result that is greater than the sum of their separate effects.

Closely Held Firm

A business entity where a small group of shareholders hold a majority of the ownership and it's not publicly traded.

Stabilize Earnings

Efforts or strategies used by businesses to maintain consistent and predictable profit levels despite market fluctuations.

Federal Outlays

Government spending funded by the federal budget, including spending on defense, education, public works, and social programs.