The equity method of accounting for investments in voting common stock is appropriate when:

Question

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The equity method of accounting is appropriate when the investor can significantly influence the investee, typically through owning between 20% and 50% of voting common stock. This method allows the investor to recognize its share of the investee's earnings or losses and reflect its investment in its financial statements. None of the other options (voting control, indefinite holding, raw material supply) determine whether the equity method is appropriate.

The Equity Method of Accounting for Investments in Voting Common