If 10% 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 cost method.
B) the equity method.
C) the preparation of consolidated financial statements.
D) determined by agreement with whomever owns the remaining 90% of the stock.

Common Stock

Equity ownership in a corporation, representing a claim on its earnings and assets, and conferring voting rights in certain corporate decisions.

Cost Method

This accounting approach involves recording an investment at its original cost without adjusting for changes in market value.

Equity Method

An accounting technique used to record investments in other companies where the investor has significant influence but does not have full control.