The Equity Method of Accounting for an Investment in an Associate

question 39

Multiple Choice

The equity method of accounting for an investment in an associate includes which of the following steps?
I II III IV
Recognise the initial investment at cost Yes Yes No No
Recognise the initial investment at fair value Yes No Yes No
Reduce the carrying amount by any dividends No Yes No Yes
Adjust the carrying amount by the investor's
Share of the associate's profit or loss No Yes Yes No

• A)I
• B)II
• C)III
• D)IV

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Definitions:

Contribute

To give or donate something, such as resources, ideas, or money, towards a common goal or project.

Benefit

An advantage, profit, or gain received from something.

Second Job

Employment taken in addition to one's primary job, often to earn extra income or gain additional experience.

Full Time

Employment status where an individual works a minimum number of hours as defined by the employer, typically considered to be around 35 to 40 hours per week.