When is the equity method not used to account for a long-term investment in common stock?
A)When the investment is 30% of the voting stock and significant influence can be achieved.
B)When the investment is 18% and significant influence can be achieved.
C)When the investment is greater than 50% of the voting stock and control is achieved.
D)When the investment is 40% of the voting stock and significant influence can be achieved.

Question

Quizplus · Accepted Answer

The equity method is not used when the investor has control over the investee, which is achieved when the investor owns more than 50% of the voting stock. In this case, consolidation accounting would be used instead of the equity method. Therefore, choice C is the correct answer. Choice A and D are incorrect because they both mention significant influence, which is the criteria for using the equity method. Choice B is incorrect because it is below the threshold for using the equity method but does not consider control.

When Is the Equity Method Not Used to Account for a Long-Term