11. Under the equity method, the receipt of dividends from the investee company results in an increase in the Share Investments account.
12. If an investor owns 30% of the ordinary shares of a corporation, it is generally presumed that the investor cannot exert significant influence over the financial and operating activities of the business.
13. When an investor has significant influence but not control over an investee, the investee is referred to as an associate.
14. Under the equity method, the investor records its share of the associate's net income in the year in which it is earned.
15. Under the equity method, the investment account is increased by the investor's share of the associate's dividends.
16. A company that owns more than 50% of the ordinary shares of another entity is known as the parent company and usually prepares consolidates financial statements.
17. Consolidated financial statements are appropriate when an investor controls an investee by ownership of more than 50% of the investee's ordinary shares.
18. Consolidated financial statements are prepared in place of the financial statements for the parent and subsidiary companies.
19. Consolidated financial statements should be prepared only when a subsidiary company has a controlling interest in the parent company.
20. The valuation of non-trading securities is similar to the procedures followed for trading securities, except that changes in fair value are not recognized in current income.