Below is the answer i provided to my professor, however, She replied and i'm not too sure what needs to reply...

What types of investments in common stock are accounted for using (a) the equity method and

The Equity Method: The equity method of accounting is used to account for an organizations investment in another entity. This method is only used when the investor has significant influence over the investee. The firm reports the income earned on the investment on its income statement and the reported value is based on the firm's share of the company assets. This method is only used when the investor can influence the operating or financial decisions of the investee.

Treatment of Investment: if the investee issues dividends to the investor, the investor should deduct the amount of these dividends from the carrying amount of its investment in the investee.

(b) the cost method?

Cost Method: When an investing entity makes an investment and the investment has no substantial influence over the investee (generally considered to be an investment of 20% or less of the shares of the investee and not determinable fair value. the cost method mandates that the investor account for the investment at its historical cost that means at the purchase price. And the investment appears as an asset on the balance sheet of the investor.

How is the receipt of a dividend treated under the equity method? under the cost method?

Treatment of Dividend: If the investee pays dividends, the investor records them as dividend income; there is no impact on the investment account. In case of cost method, dividend receipts are treated as income in income statement.

2. Review the financial statements of a well-known public company and comment on their investments as reported in their Form 10-K. You should list the different type of investments, percentage ownership, and method of accounting for the investments

From the 2014 10-k form, Apple had three types of investments. First, stocks are the significant investment in Apple Inc. as of October 2014; the company had over 26 thousand shareholders. However, institutions were the largest holding of three billion shares. Shareholders own up to 60 percent of the enterprise (Sanchirico, 2014). Secondly, mutual funds also provide investment opportunity at Apple. In 2004, mutual funds amounted to over $2, 531 million. Lastly, the company offered mortgage and asset-based securities amounting to $12,907 million as of September 2014 (Sanchirico, 2014).

Apple uses the equity method to account for its types of investments. The 2014 form 10-k plan lists shareholders equity as a liability to the company. The method is in line with the equity method that accounts for an institutions investment in another company. The majority of shareholders in Apple are influential organizations that influence significant decisions made by the corporation. Therefore, the company chooses to use equity methods of accounting.

My proffessor reply was the following:

Thanks for identifying under what circumstance each method would be used. I know you mentioned that the cost method is used when there is no substantial influence over the investee, is there ever a time that the cost method is still used although the investor does have significant influence? Please explain.