I have a note that reads: Using the equity method to account for a stake in anohter company, WHEN ACQUIRED WITH CASH, results in a decrease in current assets in the amount of cash and a contra-asset to be created, thus leaving assets UNCHANGED. - I get what it’s saying, no problem. HOWEVER, are Current Assets left unchanged? I know for Prop/Full Consolidation you have to decrease cash which reduces the current ratio.
I think you reduce cash, so CA is lower.
You would reduce cash and increase the equity account. An asset for an asset.
trade current asset for lt asset. total assets the same but current assets lower.