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Why equity method appropriate for Tran Corp investment

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Reference no: EM132692279

Problem - At a total cost of $5,600,000, Herrera Corporation acquired 280,000 shares of Tran Corp. common stock as a long-term investment. Herrera Corporation uses the equity method of accounting for this investment. Tran Corp. has 800,000 shares of common stock outstanding, including the shares acquired by Herrera Corporation. Why is the equity method appropriate for the Tran Corp. investment?

Reference no: EM132692279

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