If an investor owns less than 20% of the common stock of another company as a long-term investment:
A)the equity method of accounting should be used for the investment.
B)the investor has a controlling interest in the investee.
C)the investor usually has little or no influence on the investee.
D)the investor has significant influence on the investee.

Question

Quizplus · Accepted Answer

When an investor owns less than 20% of the common stock of another company as a long-term investment, the investor usually has little or no influence on the investee. Therefore, the equity method of accounting should not be used, and the investor does not have significant influence or control over the investee.

If an Investor Owns Less Than 20% of the Common