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Under the Equity Method

Question 9

Multiple Choice

Under the Equity Method,

A) the parent's investment in the subsidiary is recorded at Cost,and never changed thereafter.
B) the parent records its pro rata share of the subsidiary's post-acquisition income as an increase to the investment account and reduces the investment account with its share of the dividends declared by the subsidiary.
C) the parent records its pro rata share of the subsidiary's cumulative earnings as an increase to the investment account and reduces the investment account with its share of the dividends declared by the subsidiary.
D) the parent's investment in the Subsidiary is recorded at Cost and reduced by any excess dividends received from the subsidiary.

Correct Answer: