Question

Armando Company owns 17,000 of the 70,000 shares of common stock outstanding of Tito Company and exercises a significant influence over its operating and financial policies. The investment should be accounted for by the a.cost or market method
b.cost method
c.equity method
d.market method

Answer 1

Answer:

The correct answer is C

Explanation:

Equity method is the method which involve the process for treating the investment in the associate companies. The proportional share of investor, in the associate company's net income income increases the investment whereas net loss decreases the investment and the proportional payments of dividends decrease it.

So, in this case, the Armando company owning the 17,000 of the 70,000 shares of Tito company, therefore, the investment should be accounted by the equity method.