When is the equity method used to account for long-term investments in common stock?
A)When the investment is between 20% and 50% of the voting stock,regardless of whether or not significant influence can be achieved.
B)When the investment is greater than 50% of the voting stock,regardless of whether or not significant influence can be achieved.
C)When the investment is greater than 50% of the voting stock and significant influence can be achieved.
D)When the investment is between 20% and 50% of the voting stock and significant influence can be achieved.

Question

Quizplus · Accepted Answer

The equity method of accounting is used when an investor holds an ownership interest between 20% and 50% of the voting stock, and significant influence can be achieved. This means the investor has the power to participate in the financial and operating policy decisions of the investee. Therefore, choice D is the correct answer.

When Is the Equity Method Used to Account for Long-Term