Which of the Following Is True About a Passive Investment

question 106

Multiple Choice

Which of the following is true about a passive investment in common stock?

• A)The investing company usually owns less than 20% of the voting stock in the affiliate and the investment is reported on the balance sheet at cost.
• B)The investment must not have any voting rights.
• C)The fair value method requires unrealized gains and losses to be recognized on the income statement.
• D)The investing company usually owns less than 20% of the voting stock in the affiliate and the investment must be reported at fair value on the balance sheet.

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