Company B has 40,000 shares of its common stock outstanding.Company A owns 15,000 shares of Company B stock.Company A should use the _____ method to account for its investment in Company B.
A)market
B)equity
C)cost
D)consolidated

Question

Quizplus · Accepted Answer

Company A owns 15,000 out of 40,000 shares of Company B, which is 37.5% of the company. Typically, the equity method is used when an investing company owns 20% to 50% of another company, indicating significant influence over the invested company.

Company B Has 40,000 Shares of Its Common Stock Outstanding