Asked by Tatum Briggs on Jul 12, 2024
Verified
Under the equity method the Stock Investments account is credited when the
A) investee reports net income.
B) investee reports a net loss.
C) investment is originally acquired.
D) investee reports net income and when the investment is originally acquired.
Equity Method
An accounting technique used when a company holds significant influence over another company but does not have full control, involving recording investments at original cost and adjusting for the share of profit or loss.
Stock Investments
Financial assets representing ownership in a company or corporation, typically bought and sold on stock exchanges.
Investee
A company or entity in which an investor holds a minority interest, typically through the ownership of shares.
- Comprehend the application of the equity method in accounting for investments and its effects on financial statements.
Verified Answer
TA
Tasha AndersonJul 13, 2024
Final Answer :
B
Explanation :
Under the equity method, the Stock Investments account is credited (decreased) when the investee reports a net loss, reflecting the investor's share of the loss.
Learning Objectives
- Comprehend the application of the equity method in accounting for investments and its effects on financial statements.