A Parent Company Can Record an Investment in Its Subsidiary

Multiple Choice

A parent company can record an investment in its subsidiary under either the cost or equity method.Which of the following statements about consolidated net income is true?

A) Consolidated net income is higher if the parent company uses the equity method rather than the cost method.
B) Consolidated net income is higher if the parent company uses the cost method rather than the equity method.
C) Consolidated net income is higher if the parent company uses the equity method only if the subsidiary is profitable and has not paid any dividends.
D) Consolidated net income is the same under both methods.