Videos
When is the carrying value of the investment account reduced under equity-method reporting?
Equity Method:
The equity method is used by the investing entity to record its investment in the investee entity. In this method, the investing company records its share in the profit of the investee company in its income statement. The investment value is also adjusted with the amount of share in profit or loss.
The equity method is applied only when the investing entity has significant influence over the investee entity.
To indicate: The situation when the carrying value of the investment account is reduced under the equity method reporting.
Explanation of Solution
The equity method is applied by the investing company to record the investment made in the investee company. Under this method, the investment account is adjusted with the share in profit or loss reported by the investee company. The value of the investment increases in the case of profit and decreases in case of loss reported.
Hence, under the equity method reporting, the carrying value of the investment account is reduced in case of loss reported by the investee entity.
Want to see more full solutions like this?
Chapter 4 Solutions
Advanced Financial Accounting
- Problem related general Accountingarrow_forwardCalculate its day's sales uncollected of this general accounting questionarrow_forwardOn January 1, 2017, Chintan Corp., a 75% owned subsidiary of Victor Inc., transferred equipment with a 10-year useful life to Victor Inc. in exchange for $95,000 cash. At the date of transfer, Chintan’s records carried the equipment at a cost of $140,000 with accumulated depreciation of $60,000. Straight-line depreciation is used. Chintan reported net income of $50,000 and $42,000 for 2017 and 2018, respectively. All net income effects of the intra-entity transfer are attributed to the seller for consolidation purposes. Compute the gain recognized by Chintan Corp. relating to the equipment for 2017.helparrow_forward
EBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENT
Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College Pub
Intermediate Financial Management (MindTap Course...FinanceISBN:9781337395083Author:Eugene F. Brigham, Phillip R. DavesPublisher:Cengage LearningPrinciples of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax College
Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning