Which of the Following Statements Is True About the Equity

question 23

Multiple Choice

Which of the following statements is true about the equity method of accounting?

• A)This method is used when the investor has no influence over the associate.
• B)This method is a condensed consolidation that shows the investor's share of the net assets and net income of the investee.
• C)This method record dividends from the associate as income from operations.
• D)This method has the same accounting impact as the amortized cost method.

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Definitions:

Cash Dividends

Payments made by a corporation to its shareholders from profits in the form of cash.

Journal Entries

The recording of financial transactions into the general ledger, detailing the accounts affected, amounts, and dates, which forms the basis of the accounting system.

Trading Securities

Financial instruments bought and held primarily for selling them in the short term to profit from their price changes, recorded as current assets on the balance sheet.

Fair Value

The estimated market price of an asset or liability that is agreed upon by a willing buyer and seller in an arm's length transaction.