An investment accounted for under the equity method would record an increase in the investment account and create net earnings in an amount equal to the proportionate share of the investee's reported net earnings.

Question

Quizplus · Accepted Answer

This statement is true. When an investment is accounted for under the equity method, the investor recognizes its proportionate share of the investee's net earnings in its own net earnings, which increases the investment account. This is a fundamental principle of equity accounting.

An Investment Accounted for Under the Equity Method Would Record