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The equity method of accounting for an investment is used when a company purchases:_______. A) More than 20% of the equity securities of a second company B) More than 20% of the debt securities of a second company C) 15% of the equity securities of a second company D) 100% of the debt securities of a second company

Respuesta :

Answer: A

Explanation:

The equity method of accounting for an investment is a type of accounting that is used when an investor has a significant impact on the investee but does not use control it fully, just like the relationship between a parent company and its branch. In cases where the equity method of accounting is used, the investee is referred to as an affiliate or an associate.

An investor can only have a significant influence over the investee if it owns 20% to 50% of the shares or voting rights of the investee.

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