A Change from the Cost Method to the Equity Method

question 21

Multiple Choice

A change from the cost method to the equity method of accounting for an investment in common stock resulting from an increase in the number of shares held by the investor requires:

• A) only a footnote disclosure.
• B) that the cumulative amount of the change be shown as a line item on the income statement, net of tax.
• C) that the change be accounted for as an unrealized gain included in other comprehensive income.
• D) retroactive restatement as if the investor always had used the equity method.

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