A parent company can record its investment in a subsidiary using either the cost or the equity method. Which account will appear on the financial statements under the equity method, but not under the cost method?
A)Investment in subsidiary
B)Unamortized fair value adjustments
C)Equity earnings of subsidiary
D)Goodwill

Question

Quizplus · Accepted Answer

Under the equity method, the parent company recognizes its share of the subsidiary's net income as Equity Earnings of Subsidiary in the income statement, which does not appear under the cost method. The Investment in Subsidiary account and any unamortized fair value adjustments and goodwill would appear under both methods.

A Parent Company Can Record Its Investment in a Subsidiary