The method of accounting for investments in equity securities in which the investor records its share of periodic net income of the investee is the
A) fair value method
B) market method
C) income method
D) equity method

Question

Quizplus · Accepted Answer

The equity method of accounting for investments in equity securities involves recording the investor's share of the periodic net income of the investee. This method is used when the investor has significant influence over the investee, but not control. It is different from the fair value method, which involves recording the investment at fair value on the balance sheet and recognizing changes in fair value in the income statement. The market method is not a recognized accounting method, and the income method is a generic term that could refer to different methods of calculating income.

The Method of Accounting for Investments in Equity Securities in Which