For equity stakes in subsidiaries where the stake is between 20 and 50 percent of the subsidiary,the holding is recorded on the balance sheet at:
A)Market value,and the parent's portion of the subsidiary's profits are shown below operating profit on the parent company's income statement.
B)Historical cost plus reinvested income,and the parent's portion of the subsidiary's profits are shown in the regular operating profit of the parent company.
C)Market value,and the parent's portion of the subsidiary's profits are shown in the regular operating profit of the parent company.
D)Historical cost plus reinvested income,and the parent's portion of the subsidiary's profits are shown below operating profit on the parent company's income statement.

Question

Quizplus · Accepted Answer

When a company holds 20-50% of a subsidiary, it typically uses the equity method, recording the investment at historical cost plus the parent's share of the subsidiary's profits, which are shown below operating profit.

For Equity Stakes in Subsidiaries Where the Stake Is Between