When a corporation owns more than 50 percent of the voting stock in another corporation,it usually should report its investment by using (the)
A)equity method.
B)cost adjusted to market method.
C)book value method.
D)consolidated financial statements.

Question

Quizplus · Accepted Answer

When one corporation owns more than 50% of the voting stock in another corporation, it has a controlling interest and should consolidate the financial statements of the subsidiary with its own financial statements. Therefore, the correct method for reporting the investment is D) consolidated financial statements. The equity method (A) is used for investments in which the investor has significant influence, but not control. The cost adjusted to market method (B) is used for investments in which the investor has no significant influence or control. The book value method (C) is not a recognized method for reporting investments in another corporation.

When a Corporation Owns More Than 50 Percent of the Voting