The equity method of accounting for an investment in an associate includes the following steps:

Question

Quizplus · Accepted Answer

The equity method of accounting includes the following steps:
I. Record the initial investment at cost
II. Recognize the investor's share of the associate's profits or losses in the investor's income statement
III. Adjust the investment balance for the investor's share of any dividends or distributions paid by the associate
IV. Adjust the investment balance for the investor's share of any changes in the associate's net assets not recognized in earnings. 
Therefore, only step II is included in the choice list, making B the best answer.

The Equity Method of Accounting for an Investment in an Associate