Acme Corporation purchases a 3% interest in Bandy Company to become the single largest shareholder of Bandy. Acme will hold a seat on the Board of Directors of Bandy. Acme will account for its investment in Bandy using the:
A) lower of cost or market method.
B) equity method.
C) acquisition method.
Your answer: C was incorrect. The correct answer was B) equity method.
Even though Acme’s interest is low at only 3%, they have significant influence by having a seat on Bandy’s Board of Directors. As such, they must use the equity method.
I think it should be acquisition method since it have influence to the company?作者: dandman 时间: 2013-4-7 10:35
Acquisition only when you have “control”.
Equity when you have “significant influence” In this case it should be Equity method
Eg: if there were total 10 board members and Acme had 6 or more members on Bandy’s Board, Acme has control.
But if Acme only has 1 board member on Bandy’s board, it only has influence
