Question

When does a company like Coca-Cola account for its investment using the equity method?

a. When it has significant influence
b. When it has control
c. When it has minority interest
d. When it has no influence

Answer 1

A company like Coca-Cola accounts for its investment using the equity method when it has significant influence over the investee company.

Step-by-step explanation:

When a company like Coca-Cola accounts for its investment using the equity method, it does so when it has significant influence over the investee company.

The equity method is used when the company has the ability to exert significant control over the financial and operating policies of the investee, without having full control over it.

It typically arises when a company owns between 20% and 50% of the voting shares of another company.

By using the equity method, Coca-Cola records its share of the investee company's profits or losses on its own financial statements, reflecting its proportional ownership.