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 15% 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.The investment must be 50% or less of the voting stock and the ability to exert significant influence must exist.

Question

Quizplus · Accepted Answer

The equity method is not used when the investment is greater than 50% of the voting stock and control is achieved. In this case, the investor would use consolidation to account for the investment. For all other cases, including when the investment is 30% with significant influence and when the investment is 15% with significant influence, the equity method would be used.

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