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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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BuyFindarrow_forward

Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Describe the equity method of accounting for investments. Under which circumstances should it be used?

To determine

The equity method of accounting for investments and state the circumstances when it is used.

Explanation

Equity method of accounting for investments is defined as a method or technique which is used by the firms to assess the profits that are earned by the way of investments in some other companies.

This income earned is reported on the income statement

This is a standard technique which is used when a company has investment in some other company.

When a company has held 20% or more of another company’s stock, it is considered to have a significant control, which basically means the power one company has over the other...

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