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

Question

Quizplus · Accepted Answer

When one company owns more than 50% of the common stock of another company, it indicates a parent-subsidiary relationship. The company that owns the majority of the common stock is the parent company, and the other company is the subsidiary. This means the parent company has control over the subsidiary and can make decisions on its behalf. Therefore, the subsidiary's financial statements should be consolidated with the parent company's financial statements.

If One Company Owns More Than 50% of the Common