When a Company Invests in Equity Securities with 20% or More

question 60

True/False

When a company invests in equity securities with 20% or more, but less than 50%, ownership in the investee's voting stock, the investor can significantly influence the investee's decisions.

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Definitions:

Prepaid Insurance

Prepaid insurance refers to insurance premiums that have been paid in advance and are recorded as a current asset on the company's balance sheet until the period the insurance coverage relates to occurs.

Adjusting Entry

An adjusting entry is made in the accounting records at the end of a period to allocate income and expenditures to the appropriate period.

Insurance Expense

The cost incurred by a business or individual for purchasing insurance coverage.

Office Supplies Expense

The cost associated with purchasing supplies used in the daily operations of an office.