Match each of the definitions that follow with the appropriate investment term (a-j).
-What occurs when a company purchases 50% or more of another company's stock
A)Debt securities
B)Equity securities
C)Investor
D)Investee
E)Cost method
F)Trading securities
G)Available-for-sale securities
H)Held-to-maturity securities
I)Equity method
J)Business combination

Question

Quizplus · Accepted Answer

Business combination refers to the scenario when a company purchases 50% or more of another company's stock.

Answer: I
 Equity method refers to an accounting technique that records investments in the equity securities of another company based on the investor's percentage of ownership. This method is often used when the investor owns between 20-50% of the investee's stock.

Answer: B
 Equity securities refer to ownership interests in a company, such as common or preferred stock. This would be the type of security purchased in a business combination scenario.

Match Each of the Definitions That Follow with the Appropriate