What method must be used if FASB Statement No.94 prohibits full consolidation of a 70% owned subsidiary?
A)The cost method
B)The Liquidation value
C)Market value
D)Equity method

Question

Quizplus · Accepted Answer

FASB Statement No. 94 prohibits full consolidation of a subsidiary if there is no control over the subsidiary. In this case, the equity method must be used to account for the investment. The equity method is used when an investor has significant influence over but not control of the investee. This method records the investor's share of the investee's earnings and losses in the investor's income statement. Therefore, the best choice is D -The equity method.

What Method Must Be Used If FASB Statement No