In accounting for stock investments of less than 20% the equity method is used.

Equity Method

An accounting method in which the investment in common stock is initially recorded at cost, and the investment account is then adjusted annually to show the investor’s equity in the investee.

Stock Investments

Financial assets representing ownership in a company or corporation, typically traded on stock exchanges.

Absorb the essential theories and practices in recording entries for equity and debt investments.

Verified Answer

Alexander HartzlerMay 16, 2024

Final Answer :

False

Explanation :

The equity method is used for stock investments between 20% and 50%. For investments of less than 20%, the cost method is typically used.

Learning Objectives

Absorb the essential theories and practices in recording entries for equity and debt investments.

In accounting for stock investments of less than 20% the equity method is used.

Definitions

Learning Objectives

Learning Objectives

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