Which of the following methods of accounting for investments is appropriate when the investor has significant influence over the investee?

Question

Quizplus · Accepted Answer

The equity method is appropriate when the investor has significant influence over the investee, which is generally indicated by ownership of 20-50% of the voting stock. This method records the investment at cost and subsequently adjusts it for the investor's share of the investee's net income or loss and dividends received. The consolidation method is used when the investor has control over the investee, which is generally indicated by ownership of more than 50% of the voting stock. The cost method is used when the investor has no significant influence over the investee, and the lower of cost or market method is used for valuing inventory, not investments.

Which of the Following Methods of Accounting for Investments Is