Company P Company Uses the Equity Method to Account for Its

question 4

Multiple Choice

Company P Company uses the equity method to account for its January 1, 20X1, purchase of 30% of Company S's common stock.On January 1, 20X1, the market values of Company S's FIFO inventory and land exceed their book values.How do these excesses of market values over book values affect Company P's reported equity in Company S's 20X1 earnings? ​
Inventory Excess Land Excess

• A)Decrease Decrease
• B)​Decrease No effect
• C)​Increase Increase
• D)​Increase No effect