Arizona Company has 40,000 shares of its common stock outstanding.Mexico Company owns 5,000 shares of Arizona Company's stock.Which of the following methods should Mexico Company use to account for its investment in Arizona Company?
A) market-value
B) equity
C) consolidated
D) available-for-sale

Question

Quizplus · Accepted Answer

Mexico Company owns 12.5% (5,000/40,000) of Arizona Company's stock, which is typically not enough to exert significant influence. Therefore, the market-value method is appropriate for accounting for this level of investment.

Arizona Company Has 40,000 Shares of Its Common Stock Outstanding