Beige Corporation pays $500,000 to acquire 40% of the equity securities of Olive Technologies Inc.on May 5,2015.This investment will be classified as a(n)________.

Question

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Since Beige Corporation acquires 40% of the equity securities of Olive Technologies Inc., this investment will be considered a significant interest investment in accordance with the equity method of accounting, which requires that the investment is reported on the balance sheet at cost and that the investor must recognize its share of the investee's net income or loss in its income statement. Therefore, option C is the best choice. Trading investments are short-term investments intended to be sold within a short period, while available-for-sale investments are investments in equity securities that are not classified as trading or significant interest investments. Held-to-maturity investments relate to debt instruments that the investor intends to hold until maturity.

Beige Corporation Pays $500,000 to Acquire 40% of the Equity