If the equity method is used to account for an investment in common shares
A) it is presumed that the investor has no significant influence on the investee.
B) net income of the investee are ignored by the investor.
C) net income of the investee are recorded as realized gains, but dividends received are credited to the investment account.
D) the investment account may be at times greater than the acquisition cost.

Question

Quizplus · Accepted Answer

Under the equity method, the investment account is adjusted for the investor's share of the investee's net income or loss, which can cause the investment account to exceed the initial acquisition cost.

If the Equity Method Is Used to Account for an Investment