Chapter AH, Problem 7Q

To determine

 (a)

Equity method:  It refers to an accounting technique used by an investor to determine the income earned on investments made in long-term equity securities of a company.  Thus, the investor who owns a significant interest by having more than 20%, but less than 50% of ownership, accounts for investments in long-term equity securities under this method.

To explain: the accounting treatment of long-term investment in common stock.

To determine

(b)

To explain: the recognition of revenue under equity method.