Select the correct answer for each of the following questions. 1. Companies often acquire ownership in other

Question:

Select the correct answer for each of the following questions.
1. Companies often acquire ownership in other companies using a variety of ownership arrangements. The investor should use equity-method reporting whenever
a. The investor purchases voting of the investee.
b. The investor has significant influence over the operating and financing decisions of the investee.
c. The investor purchases goods and services from the investee.
d. The carrying value of the investment is less than the market value of the investee’s shares held by the investor.
2. The carrying amount of an investment in stock correctly accounted for under the equity method is equal to
a. The original price paid to purchase the investment.
b. The original price paid to purchase the investment plus cumulative net income plus cumulative dividends declared by the investee since the date the investment was acquired.
c. The original price paid to purchase the investment plus cumulative net income minus cumulative dividends declared by the investee since the date the investment was acquired.
d. The original price paid to purchase the investment minus cumulative net income minus cumulative dividends declared by the investee since the date the investment was acquired.

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on...