If 15% of the Common Stock of an Investee Company

question 44

Multiple Choice

If 15% of the common stock of an investee company is purchased as a long-term investment,the appropriate method of accounting for the investment is:

• A)the equity method.
• B)the consolidation method.
• C)the fair value method.
• D)the lower of cost or market method.

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Definitions:

Sales

The transactions between a company and its customers involving the exchange of goods or services for payment.

Monthly Sales

The total revenue generated from goods sold or services rendered by a company during a one-month period.

Security for a Loan

Collateral or assets pledged by a borrower to secure a loan, providing a lender assurance of repayment.

Blanket Liens

A security interest covering nearly all types of collateral owned by the debtor.