Armando Company owns 17,000 of the 70,000 shares of common stock outstanding of Tito Company and exercises a significant influence over its operating and financial policies. The investment should be accounted for by the

Question

Quizplus · Accepted Answer

According to the significant influence criterion in ASC 323, the equity method should be used to account for investments in common stock when the investor owns between 20% and 50% of the outstanding voting shares. As Armando Company owns only 17,000 out of 70,000 shares (24.3%), it meets this criterion and should use the equity method to account for its investment in Tito Company. Therefore, choice A is the best answer.

Armando Company Owns 17,000 of the 70,000 Shares of Common