Under the equity method of accounting parent-retained earnings and the consolidated-retained earnings are equal.

Question

Quizplus · Accepted Answer

Under the equity method, the parent company's investment in the subsidiary is recorded at cost and adjusted each period to reflect the share of the subsidiary's net income or loss. The parent company's retained earnings are not affected by the subsidiary's earnings or losses, so the parent-retained earnings and the consolidated-retained earnings are not equal.

Under the Equity Method of Accounting Parent-Retained Earnings and the Consolidated-Retained