Which One of the Following Statements Is False

question 53

Multiple Choice

Which one of the following statements is false?

• A)Under the equity method, revenue is recognized when net income is earned by the associate.
• B)When the equity method is used to account for an investment in shares, dividends received are accounted for as a reduction in the investment account.
• C)Under the equity method, the investment account is adjusted annually for a portion of associate's net income and for dividends received.
• D)Under the equity method, revenue is recognized when net income is earned by the investor which may not be when it is earned by the investee.

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Definitions:

Operating Cycle

The duration of time it takes for a company to purchase inventory, sell the goods, and collect cash from the sale.

Dividends Declared

A firm's announcement of the payment of a dividend to shareholders by a specified date, representing a commitment to distribute a portion of earnings.

Net Income

The net income of a company, calculated by removing all costs and taxes from the total sales.

Consolidated Income Statement

A financial statement that combines the income statements of a parent company and its subsidiaries, providing a comprehensive overview of the total income generated.