Each transaction listed in below relates to a long-term investment is equity securities.Select the letters of the accounting effects (a through h) and place them in the space provided.Transactions may have more than one answer.
-Using the equity method the market price of the investment increases above its cost.
A) Increase assets
B) Increase shareholders' equity (Contributed Capital)
C) Increase shareholders' equity (Retained Earnings)
D) Decrease liabilities
E) Decrease shareholders' equity (Retained Earnings)
F) Decrease assets
G) Increase liabilities
H) The event is not communicated on financial statements.

Question

Quizplus · Accepted Answer

Under the equity method, increases in the market price of the investment above its cost do not affect the financial statements directly. The equity method recognizes income from the investee and adjusts the investment's carrying amount accordingly, but unrealized holding gains or losses (like an increase in market price) are not recognized in the financial statements.

Each Transaction Listed in Below Relates to a Long-Term Investment