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Intermediate Accounting (Kieso)
Found in: Page 610

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Short Answer

Explain how the investment account is affected by investee activities under the equity method.

Explain how the investment account is affected by investee activities under the equity method.

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Step by Step Solution

Definition of investment account

An investment account is an account that is related to all types of the securities account.

Affect on investment account

As the investment account is adjusted with the changes made by the investee’s account, every increase or decrease takes place in the investee’s account. When the amount of the earnings increases or decreases, the investment account is also increases or decreases. Whenever investors receive their dividend, the investment account decreases. Hence, in this way, the investment account is affected by investee activities under the equity method.

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