The method of accounting for subsidiaries where investment income is limited to dividends received is thea.cost method.b.simple equity method.c.investment method.d.sophisticated equity method.

Answered: The method of accounting for…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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The method of accounting for subsidiaries where investment income is limited to dividends received is the

a.	cost method.
b.	simple equity method.
c.	investment method.
d.	sophisticated equity method.

Expert Solution

Step 1

The simple equity method represents that the investment would be recorded at its historical cost and adjustment would be made according to the ownership percentage in loss, income, and dividend payouts.

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