Question #7
Reading: Reading 8 Intercorporate Investments
PDF File: Reading 8 Intercorporate Investments.pdf
Page: 4
Status: Incorrect
Correct Answer: A
Your Answer: A
Question
Harter Company recently acquired a 40% stake in Compton Corp. for $40 million in cash by borrowing at 10%. Harter will account for this acquisition using which of the following methods:
Answer Choices:
A. Acquisition Method
B. Held to maturity debt securities method
C. Equity method
Explanation
The 40% ownership stake would indicate that significant influence has been gained over
the affiliate company. The equity method would be used.