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When referring to an investment involving the acquisition of the voting stock of that company, what...

When referring to an investment involving the acquisition of the voting stock of that company, what are the two method of accounting treatments that can be used to account for that investment?
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Answer: Methods of accounting treatment used for acquisition of voting stock:

1.       Cost method: In cost method, stock investment is recorded at acquisition cost in “Asset-Stock Investment” account. This method is generally used when less than 20% stake is acquired and no significant control is present.

2.       Equity Method: This method is used when more than 20% & up to 50% stake is acquired & when the investor can significantly influence the matters of the company. Value of investment is adjusted with amount of dividend and profits/losses of the company.

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