
Concept explainers
Equity method:
The equity method keeps the record of the parent ownership interest that is multiplied by the reported net income of the subsidiary. This income will be added to parent investment account and the deduction in this method will be of the parent’s ownership interest multiplied by the reported losses of the subsidiary and parent’s ownership interest multiplied by the declared dividends of the subsidiary. All together equals the equity-adjusted balance.
Cost method:
The cost method basically retains the original cost of acquisition balance in the subsidiary account. As the income is earned by the subsidiary, no adjustments would be made.
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Chapter 3 Solutions
Advanced Accounting
- Do fast answer of this accounting questionsarrow_forwardSamantha works as a sales assistant. She receives a weekly wage of $280 plus a commission of $0.12 per dollar of goods sold. During one week, Samantha sold goods worth $2,100. The following deductions apply to her gross earnings: pension contribution of 6.5% of gross earnings and income tax of $55. Calculate Samantha's net earnings for the week.arrow_forwardA company's net sales were... Accountingarrow_forward
- Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning
