If a Company Owns More Than 20% of the Stock

question 146

Multiple Choice

If a company owns more than 20% of the stock of another company and the stock is being held as a long-term investment,which method would the investor normally use to account for this investment?

• A)Equity method
• B)Market value method
• C)Historical cost method
• D)Straight-line method
• E)Effective method

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Definitions:

Interdependent

Mutually dependent; the condition in which two or more persons or elements rely on each other for support, functioning, or survival.

Systematic Approach

Involves a structured, methodical process for solving problems or achieving objectives, often based on a step-by-step methodology.

Theoretical Works

Scholarly writings or concepts that provide explanations or frameworks to understand phenomena within a specific field, based on principles and theories.

Cephalocaudal

A principle of development describing how growth starts at the head and moves towards the feet.