Consolidated Net Income would be:
A) higher if the parent chooses to use Equity Method rather than the Cost Method.
B) higher if the parent chooses to use the Equity Method rather than the Cost Method, provided that the subsidiary showed a profit.
C) lower if the parent chooses to use Equity Method rather than the Cost Method.
D) the same under both the Cost and Equity Methods.

Question

Quizplus · Accepted Answer

Consolidated Net Income remains the same whether the parent company uses the Equity Method or the Cost Method for accounting for its investment in a subsidiary. This is because, under consolidation, all subsidiary earnings are included in the parent's income statement regardless of the method used for internal accounting purposes.

Consolidated Net Income Would Be