Accounting for Investment in Associates by Parent Entities Using the Equity

question 29

Multiple Choice

Accounting for investment in associates by parent entities using the equity method will be done:

• A) in the parent entity financial statements
• B) in the consolidated financial statements
• C) in either the parent entity or consolidated financial statements
• D) none of the above

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Definitions:

Direct Method

In financial accounting, refers to a way of allocating service department costs directly to producing departments without intermediate allocations.

Cash Basis

A bookkeeping practice in which income and outgoings are documented at the point of actual transaction, instead of when they are accrued.

Investing Activities

Transactions involving the purchase or sale of long-term assets and investments not related to the entity's primary business operations.

Financing Activities

Activities that result in changes in the size and composition of the equity capital and borrowings of an entity, typically reported in the cash flow statement.