Which one of the following varies between the equity, initial value, and partial equity methods of accounting for an investment?
The balance in the investment account on the parent’s books.
The one that varies between the equity, initial value, and partial equity methods of accounting for an investment is the treatment of dividends received from the investee company.
Under the equity method, dividends received from the investee are treated as a reduction of the investment account. This means that the dividends received would decrease the balance of the investment account and result in a decrease in the investor’s equity.
Under the initial value method, dividends received from the investee are recorded as a return on investment. This means that the dividends received would be immediately recognized as income and increase the investor’s equity.
Under the partial equity method, dividends received from the investee are recognized as a reduction in the investment account up to the amount of the investor’s share of earnings of the investee since acquisition. Any dividends received in excess of this amount would be recognized as a return on investment and increase the investor’s equity.
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