Under the equity method,the investor ________.

Question

Quizplus · Accepted Answer

Under the equity method, the investor must record its share of the investee's net income. This is because the equity method is used to account for investments in which the investor has a significant influence over the operating and financial policies of the investee. This method requires the investor to recognize its share of the investee's net income as an increase in the Long-term Investments account and a credit to Revenue from Investments. The investor also adjusts the Long-term Investments account for its share of the investee's dividends. However, the investor does not use the LIFO method for tax purposes and does not debit the Long-term Investments account when a dividend is received.

Under the Equity Method,the Investor ________