Discuss the methods of accounting for Investment in Common Stock. Explain the concept of External Expansion? 

Accounting for investments in common stocks requires an examination of financial statements from a firm that made the investment. When a company purchases its own shares directly or through subscription, they must include the costs of acquisition as liabilities on their balance sheet. The company should identify the cash it paid to purchase these shares, and record any extra liabilities created from equity instruments issued by way of convertible bonds or warrants.

Another way to account for investment in common stocks is through external expansion. It usually involves the purchase of another business in order to improve profitability and diversify your operations. In the event of external expansion, businesses must not only record costs associated with mergers or acquisitions, but any additional expenses incurred as a result of restructuring (such debt refinancing). In addition, companies are also required to appraise both the tangible and non-tangible assets that they acquire through this expansion process. Companies may need to consider potential impairment losses if goodwill is a result of these transactions.