An investor who owns 25% of the outstanding stock of another company should report the investment using the:

Question

Quizplus · Accepted Answer

The equity method is used when an investor has significant influence over another company, which is typically defined as owning between 20% and 50% of the outstanding stock. Under the equity method, the investor records its share of the investee's earnings or losses on its own income statement, rather than consolidating the investee's financial statements with its own. Therefore, the equity method is the appropriate choice in this scenario.

An Investor Who Owns 25% of the Outstanding Stock of Another