Question

A company acquires a rather large investment in another corporation. What criteria determine whether the investor should apply the equity method of accounting to this investment?

Answer 1

Explained below:

Step-by-step explanation:

The equity method of accounting is the method of producing investments in other companies. If a company invests in another corporation and holds 20 to 50 % share of the particular corporation and hence has a notable impact on the latter's administration then the investor (company) should apply the equity method of accounting to this investment and reports such investments on its balance sheet as an asset..