If one company owns more than 50% of the common stock of another company
A) the cost method should be used to account for the investment.
B) a partnership exists.
C) a parent-subsidiary relationship exists.
D) the company whose stock is owned must be liquidated.

Question

Quizplus · Accepted Answer

If one company owns more than 50% of the common stock of another company, a parent-subsidiary relationship exists. This means the owning company (the parent) has significant control over the operations of the other company (the subsidiary). Therefore, the equity method of accounting should be used to account for the investment.

If One Company Owns More Than 50% of the Common