Under the equity method of accounting for investments,the acquisition cost of an investment is adjusted for ________.
A) dividends received only
B) investor's share of earnings or losses of investee after investment date only
C) changes in market value of investment
D) dividends received and investor's share of earnings or losses of investee after investment date

Question

Quizplus · Accepted Answer

The equity method of accounting involves adjusting the acquisition cost of an investment for both dividends received and the investor's share of earnings or losses of the investee after the investment date. This is because the investor has a significant influence over the investee and is therefore entitled to a share of its profits and losses. Changes in the market value of the investment are not relevant under the equity method, as the investor's level of influence over the investee remains the same regardless of changes in the investment's market value.

Under the Equity Method of Accounting for Investments,the Acquisition Cost