Asked by itzel torres on Jun 12, 2024
Verified
When an investor owns between 20% and 50% of the common stock of a corporation it is generally presumed that the investor has _______________ influence over the investee and therefore the appropriate method of accounting for this type of investment is the _______________ method.
Significant Influence
The power to participate in the financial and operating policy decisions of an investee without having control over those policies.
Equity Method
An accounting technique used to record an investment, where the investor recognizes income equal to its share of the investee's profit.
- Compare and contrast the equity and cost methods of accounting for investments.
- Recognize the criteria for significant influence over an investee and its implications for investment reporting.
Verified Answer
AS
Learning Objectives
- Compare and contrast the equity and cost methods of accounting for investments.
- Recognize the criteria for significant influence over an investee and its implications for investment reporting.
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