The equity method of accounting for an investment is used when a company purchases
A) More than 20% of the debt securities of a second company.
B) 100% of the debt securities of a second company.
C) 15% of the equity securities of a second company.
D) More than 20% of the equity securities of a second company.

Question

Quizplus · Accepted Answer

The equity method of accounting is used when a company purchases more than 20% of the equity securities of a second company. This method allows the investor to record its share of the investee's profits and losses on its own income statement.

The Equity Method of Accounting for an Investment Is Used