The following is an extract from the notes to the 1999 consolidated financial statements of the Chugoku Electric Power Company, Incorporated:

Equity method Investments in four (three in 1998) affiliated companies (20% to 50% owned) are accounted for by the equity method and, accordingly, are stated at cost adjusted for equity in undistributed earnings and losses from the date of acquisition.

(a) What is another name for most companies which are 20% to 50% owned?

(b) What is meant by the word ‘equity’ in the above statement?

(c) What are the entries in the statement of income under the equity method of accounting?

(d) What are the differences between the equity method and consolidation?

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