Which methods will result in the same income and shareholders' equity?

A) Equity and consolidation
B) Cost and consolidation
C) Cost and equity
D) Each method results in different income and shareholders' equity amounts.

Question

Valerie Merman · Accepted Answer

Final Answer : A, Explanation :  Equity and consolidation methods will result in the same income and shareholders' equity because both methods recognize the investee's income and changes in equity, albeit through different processes. The equity method records income as a share of the investee's profits, which increases the investment account and recognizes the investor's share of the investee's income in its income statement. The consolidation method combines the financial statements of the investor and investee as if they are a single entity, including the investee's income and equity in the consolidated financial statements. Both approaches ultimately reflect the investee's performance in the investor's financials, leading to the same income and shareholders' equity outcomes.

Which methods will result in the same income and shareholders' equity?

A) Equity and consolidation
B) Cost and consolidation
C) Cost and equity
D) Each method results in different income and shareholders' equity amounts.

Definitions

Learning Objectives

Learning Objectives

Related questions

Which methods will result in the same income and shareholders' equity?A) Equity and consolidationB) Cost and consolidationC) Cost and equityD) Each method results in different income and shareholders' equity amounts.

Definitions

Learning Objectives

Learning Objectives

Related questions

Which methods will result in the same income and shareholders' equity?

A) Equity and consolidation
B) Cost and consolidation
C) Cost and equity
D) Each method results in different income and shareholders' equity amounts.