Accounting for a joint venture is done by application of the:
A) equity method.
B) fair value method.
C) consolidation method.
D) present value method.

Question

Quizplus · Accepted Answer

The equity method is generally used for accounting for joint ventures, where two or more parties contribute resources to a new entity. Under this method, the investor records its share of the joint venture's income, expenses, and assets in its financial statements. This method is preferred when the investor has significant influence but not control over the joint venture. The fair value method may be used if the joint venture meets certain criteria, such as being an investment in a marketable security. The consolidation method is used when one entity has control over another, and the present value method is used for discounting future cash flows.

Accounting for a Joint Venture Is Done by Application of The