Company B has 40,000 shares of its common stock outstanding.Company A owns 5,000 shares of Company B's stock.What method should Company A use to account for its investment in Company B?
A)market-value
B)equity
C)consolidated
D)available-for-sale

Question

Quizplus · Accepted Answer

Company A owns 12.5% (5,000 out of 40,000) of Company B's stock, which is typically not enough to exert significant influence. Therefore, the market-value method is appropriate for accounting for this level of investment.

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