Asked by Jordan Canales on Jun 10, 2024
Verified
Under the equity method the investment in common stock is initially recorded at cost and the Stock Investments account is adjusted annually.
Equity Method
An accounting technique used to record investments in other companies, where the investment is significant but not controlling.
Stock Investments Account
An account used to record the purchases and sales of equity securities, such as shares of stock, that a company holds as investments.
Annually
Occurring once every year or relating to a period of one year.
- Acquire knowledge on the basics and steps for recording equity and debt investments.
- Acquire knowledge on the effects of the historical cost principle on the registration of investment dealings.
Verified Answer
AL
Aleena LatimoreJun 11, 2024
Final Answer :
True
Explanation :
Under the equity method, the investment in common stock is initially recorded at cost, and the Stock Investments account is adjusted annually for the investor's share of the investee's profits or losses, which affects the carrying value of the investment.
Learning Objectives
- Acquire knowledge on the basics and steps for recording equity and debt investments.
- Acquire knowledge on the effects of the historical cost principle on the registration of investment dealings.