The Waco Company acquired an 18% interest in the outstanding common stock of the Springfield Company.The Waco Company can exercise significant influence over the operating and financial policies of the Springfield Company.The Waco Company should account for its investment in the Springfield Company by using the

Question

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According to the statement, The Waco Company can exercise significant influence over the operating and financial policies of the Springfield Company. Therefore, the equity method should be used to account for the investment in the Springfield Company, as it allows for the recognition of the investor's share of the investee's earnings and losses on a proportional basis. The cost method (B) is appropriate for investments where the investor has no significant influence or control over the investee's operations, while securities held to maturity method (C) and lower of cost or market method (D) are not applicable to equity investments in common stock.

The Waco Company Acquired an 18% Interest in the Outstanding