When the Equity Method Is Used to Account for an Investment

question 11

True/False

When the equity method is used to account for an investment in stock,the investor will report its share of the investee's annual earnings as income in proportion to how much the investee distributes in the form of dividends.

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Definitions:

Par Value

The nominal or face value of a bond, or stock, as stated by the issuing company.

Treasury Stock

Shares that were issued and subsequently reacquired by the company. They are held in the company’s treasury and can be reissued or retired.

Common Stock

Equity ownership in a corporation, representing a claim on its dividends and assets, typically granting voting rights.

Shares Outstanding

The total number of shares of a company that have been issued and are currently held by investors.