Tag Archive | "equity method"

Investor’s Statement (accounting)?


A corporation uses the equity method to account for its 40% ownership of another company. The investee earned $20,000 and paid $5,000 in dividends. The investor made the following entries:
D Investment in affiliate 8K
C Equity in earning of affiliate 8K
D Cash 2K
C Dividend revenue 2K
What effect will these entries have on the investor’s statement of financial position?
A. Investment in affiliate overstated, retained earnings understated
B Financial position will be fairly stated.
C Investment in affiliate overstated, retained earning overstated.
D Investment in affiliate understated, retained earning understated.

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Investor’s Statement (accounting)?


A corporation uses the equity method to account for its 40% ownership of another company. The investee earned $20,000 and paid $5,000 in dividends. The investor made the following entries:
D Investment in affiliate 8K
C Equity in earning of affiliate 8K
D Cash 2K
C Dividend revenue 2K
What effect will these entries have on the investor’s statement of financial position?
A. Investment in affiliate overstated, retained earnings understated
B Financial position will be fairly stated.
C Investment in affiliate overstated, retained earning overstated.
D Investment in affiliate understated, retained earning understated.

Posted in Featured ArticlesComments (0)


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