An investor in securities accounted for by the equity method has the following information available at December 31,2012:
Market value of securities $\quad \$10,000$
Acquisition cost of securities $\quad \$8,000$
How does the investor report the change in market value on the securities at December 31,2012?
A) adjustment to Investment account
B) unrealized gain of $2,000 on income statement
C) adjustment to " other comprehensive income" account
D) not reported

Question

Quizplus · Accepted Answer

Under the equity method, the investor recognizes their share of the investee's earnings or losses, which affects the carrying amount of the investment on the balance sheet. Changes in the market value of the securities are not recognized in the financial statements.

An Investor in Securities Accounted for by the Equity Method $10,000\quad \$10,000$10,000

An Investor in Securities Accounted for by the Equity Method $\quad \$10,000$