Which of the Following Statements Regarding the Accounting for a Common

question 57

Multiple Choice

Which of the following statements regarding the accounting for a common stock investment using the equity method is incorrect?

• A)The equity method is used for investments of ownership between 20% and 50% of the outstanding voting stock when the investor has the ability to exert significant influence.
• B)The investment account is increased by the proportionate share of affiliate net income.
• C)The investment account is decreased by the proportionate share of affiliate dividends.
• D)Investment income equals the proportionate share of affiliate dividends.