Which one of the following statements is false?
A)Under the equity method, revenue is recognized when net income is earned by the associate.
B)When the equity method is used to account for an investment in shares, dividends received are accounted for as a reduction in the investment account.
C)Under the equity method, the investment account is adjusted annually for a portion of associate's net income and for dividends received.
D)Under the equity method, revenue is recognized when net income is earned by the investor which may not be when it is earned by the investee.

Question

Quizplus · Accepted Answer

Under the equity method, revenue is recognized when net income is earned by the investee, not the investor. The investor recognizes its share of the investee's net income, which aligns with the timing of the investee's earnings.

Which One of the Following Statements Is False