Which of the following statements is true about the equity method of accounting?

Question

Quizplus · Accepted Answer

The equity method of accounting is a condensed consolidation that shows the investor's share of the net assets and net income of the investee. Option A is incorrect because the equity method is used when the investor has significant influence over the associate (20-50% ownership). Option C is incorrect because dividends from the associate are recorded on the balance sheet as a reduction of the investment account, not as income from operations. Option D is incorrect because the equity method and amortized cost method have different accounting impacts.

Which of the Following Statements Is True About the Equity