An investor who owns 35% of the outstanding stock of another company should report the investment using the:

Question

Quizplus · Accepted Answer

According to the equity method, the investor should record the investment at its initial cost and subsequently adjust it for its proportionate share of the investee's net income or loss. As the investor owns more than 20% but less than 50% of the investee's outstanding stock, it should use the equity method to report the investment. The market value method is used in situations where the investor owns less than 20% of the investee's outstanding stock. The consolidated method is used when the investor owns more than 50% of the investee's outstanding stock. The historical cost is used as a basis for valuing the investment in the absence of any other reliable method.

An Investor Who Owns 35% of the Outstanding Stock of Another