For accounting purposes, the method used to account for long-term investments in common stock is determined by:

Question

Quizplus · Accepted Answer

The method used to account for long-term investments in common stock is determined by the extent of an investor's influence on the investee's operating decisions and policies. This is because an investor with significant influence over an investee must use the equity method of accounting, while an investor with no or minimal influence must use the fair value method. The amount paid for the stock, past dividends, and whether a dividend declared is cash or stock are not factors in determining the accounting method for long-term investments in common stock.

For Accounting Purposes, the Method Used to Account for Long-Term