Which of the following statements is true?
A) Equity earnings is an internal source of cash.
B) Equity earnings are recorded when investment ownership is over 50%.
C) Equity earnings may never result in the actual receipt of cash.
D) Equity earnings are recorded when investment ownership is 100%.

Question

Quizplus · Accepted Answer

Equity earnings represent the share of earnings of an investee in which an investor has ownership. While it may increase the investor's share of equity, it does not necessarily result in the receipt of cash. Option A is incorrect because equity earnings are external and not internal source of cash. Option B and D are incorrect because the ownership percentage required for recording equity earnings varies based on the investor's level of control over the investee.

Which of the Following Statements Is True