A company owning an investment for which it uses the equity method of accounting would record a reduction in the investment account for the proportionate share of the affiliate's reported net loss.

Question

Quizplus · Accepted Answer

This is because under the equity method of accounting, the investment account is adjusted for the company's proportionate share of the affiliate's earnings and losses. Therefore, a net loss reported by the affiliate would result in a reduction of the investment account.

A Company Owning an Investment for Which It Uses the Equity