CFA Practice Question

There are 334 practice questions for this study session.

CFA Practice Question

Southern Corp. purchases an investment in Morton Inc. at a purchase price of $1 million, representing 30% of the value of Morton. During the year, Morton reports net income of $100,000 and pay dividends of $40,000. At the end of the year, the market value of Southern's investment is $1.2 million. The unrealized gain of $200,000
A. Is not reflected on either the income statement or the balance sheet.
B. Is reported on the balance sheet only.
C. Is reported in other comprehensive income.
Explanation: In contract to the market method, the equity method of accounting does not report investments at market value. The unrealized gain of $200,000 is not reflected in either the balance sheet or the income statement.

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danlan2 Equity method report net income and dividend of Morton for Southern Corp.
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