Which Statement Is Not Correct About the Equity Method

question 120

Multiple Choice

Which statement is not correct about the equity method?

• A)The investment account on the balance sheet equals the original cost plus the investor's share of the investee's post-acquisition changes in net assets.
• B)This method results in reflecting two legal entities as one economic unit for financial reporting purposes.
• C)Income is recognized equal to the investor's share of the investee's net income.
• D)Dividends from the investee are deducted from the investor's investment account.

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Definitions:

Civil Code

A systematic collection of laws designed to comprehensively deal with the core areas of private law such as property, family, and contracts.

Uniform Commercial Code

An extensive collection of regulations overseeing every commercial activity within the United States.

Assignor

A person or entity who transfers obligations along with rights to another party in the context of a legal agreement.

Assignee

A person, company, or entity who is transferred the rights or interests of another's contract or property.