The Available-For-Sale Method (Market Value Method) of Accounting for Long-Term

question 55

Multiple Choice

The available-for-sale method (market value method) of accounting for long-term investments in stock should be used when the:

• A) investor owns more than 50% of the investee's stock.
• B) investor has significant influence over the investee's operating decisions and policies.
• C) investor has little or no influence on the investee.
• D) investor is a parent company.

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Definitions:

Shareholders

Individuals or entities that own shares in a corporation, giving them partial ownership and certain rights within the company.

Share Exchange

A process in which some or all of the shares of one corporation are exchanged for some or all of the shares of another corporation, and both corporations continue to exist.

Holding Company

A company whose business activity is holding shares in another company.

Boards of Directors

Governing bodies elected by shareholders to make major decisions regarding a corporation's affairs, including setting strategies and overall management oversight.