the method used to account for long-term investments in common stock 1. For accounting purposes, the method used to account for long-term investments in common stock is determined by a. the amount paid for the stock by the investor. b. the extent of an investor’s influence on the operating and financial affairs of the investee. c. whether the stock has paid dividends in past years. d. whether the acquisition of the stock by the investor was “friendly” or “hostile.” 2. If an investor owns less than 20% of the common stock of another corporation as a long-term investment, a. the equity method of accounting for the investment should be employed. b. no dividends can be expected. c. it is presumed that the investor has relatively little influence on the investee. d. it is presumed that the investor has significant influence on the investee. 3. If the cost method is used to account for a long-term investment in common stock, dividends received should be a. credited to the Stock Investments account. b. credited to the Dividend Revenue account. c. debited to the Stock Investments account. d. recorded only when 20% or more of the stock is owned. 4. If 10% of the common stock of an investee company is purchased as a long-term investment, the appropriate method of accounting for the investment is a. the cost method. b. the equity method. c. the preparation of consolidated financial statements. d. determined by agreement with whomever owns the remaining 90% of the stock. 5. The cost method of accounting for long-term investments in stock should be employed when the a. investor owns more than 50% of the investee’s stock. b. investor has significant influence on the investee and the stock held by the investor are marketable equity securities. c. market value of the shares held is greater than their historical cost. d. investor’s influence on the investee is insignificant. Business Management Assignment Help, Business Management Homework help, Business Management Study Help, Business Management Course Help
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