Which statement is not correct about the equity method?
A)The investment account on the balance sheet equals the original cost plus the investor's share of the investee's post-acquisition changes in net assets.
B)This method results in reflecting two legal entities as one economic unit for financial reporting purposes.
C)Income is recognized equal to the investor's share of the investee's net income.
D)Dividends from the investee are deducted from the investor's investment account.

Question

Quizplus · Accepted Answer

The equity method does not combine two legal entities into one for financial reporting; it accounts for the investment as an investor's share in the net assets and income of the investee, maintaining the separate legal entity status of both parties.

Which Statement Is Not Correct About the Equity Method