When an investor, using the equity method, pays more than its share of the investee's book value, the difference is
A) ignored.
B) accounted for on the investor's books by a debit to Goodwill.
C) accounted for on the investee's books by a debit to Goodwill.
D) requires that the investor's Investment account and any investment income from the associate be adjusted over time.

Question

Quizplus · Accepted Answer

When an investor pays more than its share of the investee's book value, the difference is allocated to the fair value of the investee's identifiable assets and liabilities, with any remaining excess recognized as goodwill. The investor's Investment account and any investment income from the associate are adjusted over time to reflect these allocations.

When an Investor, Using the Equity Method, Pays More Than