Which of the following statements are true? (i) Equity accounting method is used to account for investor-associate relationship (ii) Full consolidation is used to account for investor-associate relationship. (iii) Equity accounting method is used to account for parent-subsidiary relationship. (iv) The equity accounting method is used to account for investor-joint venture relationship. Select one: a. (i) and (iv) only b. (ii) and (iii) only c. (ii) and (iv) only d. (iii) and (iv) only
Which of the following statements are true?
(i) Equity accounting method is used to account for investor-associate relationship
(ii) Full consolidation is used to account for investor-associate relationship.
(iii) Equity accounting method is used to account for parent-subsidiary relationship.
(iv) The equity accounting method is used to account for investor-joint venture relationship.
Select one:
a.
(i) and (iv) only
b.
(ii) and (iii) only
c.
(ii) and (iv) only
d.
(iii) and (iv) only
Equity Accounting method - This method is used for accounting of investment in associates and joint venture, this method is account for only significant influence over the investee. Say for example X company purchase 25% equity of Y limited. In this case X limited not fully control the Y limited, it records its purchase consideration as Investment in Y limited.
Full Consolidation - This method is used for accounting when parents gets full control over the subsidiary. In this method consideration is compared with the fair value of asset acquired and goodwill and gain on bargain purchase is recorded if any. The process of consolidation is applied.
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