Homework Answers
Under the equity method, the investor :-
c) must record its share of investee's net income
The first option is not correct because when the investee report income there is an increase of investment value for investor, which implies that Revenue from Investment is credited and Investment in the Associate account is debited (and not the revenue from investment account)
The second option is not correct because when a dividend is declared, cash account is debited and investment in associate is credited because there is an outflow of cash from the investee's account whihc in turn leads to decrease in investment.
The last option is incorrect because no specific method is defined to be followed i.e LIFO or FIFO for tax purpose.
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