Under the equity method, the investor recognizes as income _____.
A)a portion of the income earned by the investee company
B)the dividends paid by the investee company
C)the change in market value of investee company stock
D)all of these answers are correct

Question

Quizplus · Accepted Answer

Under the equity method, the investor recognizes as income a portion of the income earned by the investee company, based on its ownership percentage. Dividends paid by the investee company are recognized as a reduction of the investment account, and the change in market value of investee company stock has no effect on the investor's income. Therefore, option A is the correct choice.

Under the Equity Method, the Investor Recognizes as Income _____