Usually, an investment of 20 to 50 percent in another company's voting stock is reported under the:

 Usually, an investment of 20 to 50 percent in another company's voting stock is reported under the:

Multiple Choice

cost method.


full consolidation method.


equity method. Correct

fair value method.

Explanation
The equity method is correct. The equity method is used when ownership is between 20 percent to 50 percent and when the investor has the ability to exercise significant influence over the operating and financial policies of the investee.

The cost method is appropriate when the investor company acquires more than 50 percent of the investee’s voting shares.

The full consolidation method is appropriate when the investor company acquires more than 50 percent of the investee’s voting shares.

The fair value method is used when the investor does not have significant influence and when ownership is between 0 percent to 20 percent.