The equity method of accounting for an investment is used when a company purchases
A)more than 20% of the debt securities of another company.
B)100% of the debt securities of another company.
C)15% of the equity securities of another company.
D)between 20-50% of the equity securities of another company.

Question

Quizplus · Accepted Answer

The equity method of accounting is used when the investing company purchases between 20%-50% of the equity securities of another company. This allows the investing company to have significant influence, but not control, over the other company. This method requires the investing company to record its share of the net income or loss of the other company on its own income statement.

The Equity Method of Accounting for an Investment Is Used