Ordinarily, a corporation owning a significant portion of the voting stock of another corporation accounts for the investment using the equity method.

Question

Quizplus · Accepted Answer

This statement is true. When a corporation owns between 20% and 50% of the voting stock of another corporation, it is considered a significant portion, and the investor corporation is required to use the equity method of accounting for the investment. This method records the investment as a single line item on the balance sheet and recognizes the investor's share of the investee's net income on the income statement.

Ordinarily, a Corporation Owning a Significant Portion of the Voting