If an investor owns less than 20% of the common stock of another corporation as an investment
A) the equity method of accounting for the investment should be employed.
B) no dividends can be expected.
C) it is presumed that the investor has relatively little influence on the investee.
D) it is presumed that the investor has significant influence on the investee.

Question

Quizplus · Accepted Answer

When an investor owns less than 20% of the common stock of another corporation as an investment, it is presumed that the investor has relatively little influence on the investee. Therefore, the equity method of accounting for the investment should not be employed and no dividends can be expected as well.

If an Investor Owns Less Than 20% of the Common