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Methods of Accounting for Long-Term Investments

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Teague Corporation has the following long-term investments:

1. 60 percent of the common stock of Sriel corporation

2. 13 percent of the common stock of Copper Inc.

3. 50 percent of the nonvoting preferred stock of Staffordshire Corporation

4. 100 percent of the common stock of its financing subsidiary, EQ Inc.

5. 35 percent of the common stock of the French company Rue de le Brasseur.

6. 70 percent of the common stock of the Candadian company Nova Scotia Cannery.

For each of these investments, tell which of the following methods should be used for external financial reporting and why:

a. Cost-adjusted to market method
b. Equity Method
c. Consolidation of parent and subsidiary financial statements

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The solution examines the methods of accounting for long-term investments.

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