Under the equity method of accounting, items affecting the investment income account include all but the investor's portion of:
A)the investee's net income.
B)any intercompany profits in inventory.
C)the investee company's dividends.
D)the amortization of the excesses of the price over the book value of the investment.

Question

Under the equity method of accounting, items affecting the investment income account include all but the investor's portion of:
A)the investee's net income.
B)​any intercompany profits in inventory.
C)​the investee company's dividends.
D)​the amortization of the excesses of the price over the book value of the investment.

Quizplus · Accepted Answer

Under the equity method of accounting, the investor's portion of the investee's net income increases the investment income account, while any intercompany profits in inventory and the amortization of the excess of the price over the book value of the investment are adjustments to this income. The investee company's dividends, however, reduce the carrying amount of the investment and do not affect the investment income account.

Under the Equity Method of Accounting, Items Affecting the Investment