Zoom Shoes Inc. has 115,000 shares of stock outstanding. GAS Running Company owns 35,000 shares of...
Zoom Shoes Inc. has 115,000 shares of stock outstanding. GAS Running Company owns 35,000 shares of Zoom Shoes Inc. Which of the following is true? a.GAS Running Company is the subsidiary company. b.Zoom Shoes Inc. is the parent company. c.GAS Running Company is required to use the equity method for this investment. d.GAS Running Company is required to combine the financial statements of Zoom Shoes Inc. and report as a single company.
Homework Answers
| Percentage of ownership = 35000/115000= 30% |
| When the percentage ownership is more than 20%, the investee is said to exercise significant influence and must use equity method for the investment |
| GAS Running Company is required to use the equity method for this investment. |
| Option C is correct |
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