An investor who owns 25% of the outstanding stock of another company should report the investment using the:

Question

Quizplus · Accepted Answer

The equity method is used when an investor owns significant influence but not majority control (between 20% and 50%) of the outstanding stock of another company. Under the equity method, the investor records its proportionate share of the investee's income or loss on the income statement as a single line item. This method presents the investor's investment as a single line item on the balance sheet and reports the revenue generated from the investment on the income statement. Therefore, the equity method is the best choice for an investor who owns 25% of the outstanding stock of another company.

An Investor Who Owns 25% of the Outstanding Stock of Another