Equity investment : Equity investments are stock instruments which claim ownership in the investee company and pay dividend revenue to the investor company. Cost method : Cost method is the accounting method used for accounting equity investments which claim less than 20% of the outstanding stock of the investee company. To explain : The look-through earnings.

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Chapter 13, Problem 4CP

1.

To determine

Equity investment:

Equity investments are stock instruments which claim ownership in the investee company and pay dividend revenue to the investor company.

Cost method:

Cost method is the accounting method used for accounting equity investments which claim less than 20% of the outstanding stock of the investee company.

To explain: The look-through earnings.

2.

To determine

To Identify: The reason behind Person WB favoring look-through earnings.

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