When an investor owns between 20% and 50% of the outstanding stock of another company, the ________ method is used to account for stock investments.

Question

Quizplus · Accepted Answer

When an investor owns between 20% and 50% of the outstanding stock of another company, it is considered a significant influence but not control. In this case, the equity method is used to account for stock investments. The equity method records the investment at its initial cost and subsequently adjusts the value for the investor's share of the investee's net income or loss and dividends. The other options - market value, consolidated, and historical cost - are not applicable to this situation.

When an Investor Owns Between 20% and 50% of the Outstanding