Which of the following best describes the market method and the equity method?

A.

Under both the market method and the equity method the investor recognizes income when cash dividends are paid by the investee and adjusts carrying values to the market, recognizing increases (decreases) in market value as gains (losses).

B.

Under the equity method, the investor recognizes income as it is earned by the investee and accounts for dividends as a reduction of the investment. Under the market method, the investor recognizes income when cash dividends are paid by the investee and adjusts carrying values to the market, recognizing increases (decreases) in market value as gains (losses).

C.

Under the market method the investor recognizes income as it is earned by the investee and accounts for dividends as a reduction of the investment. Under the equity method the investor recognizes income when cash dividends are paid by the investee and adjusts carrying values to market, recognizing increases (decreases) in market value as gains (losses).

D.

Under both the market method and the equity method the investor recognizes income as it is earned by the investee and accounts for dividends as a reduction of the investment. 

Answer rating: 100% (QA)

Answer B Under the equity method the investor recognizes income as it is earned by the invest... View the full answer