Answer: liabilities

**Proportionate Consolidation vs. Equity Method:** - **Proportionate Consolidation**: The investor recognizes its proportionate share of the joint venture's assets, liabilities, revenues, and expenses on its financial statements. - **Equity Method**: The investor recognizes only its share of the joint venture's net income and carries the investment at cost plus its share of undistributed earnings. **Key Differences:** - **Liabilities**: Proportionate consolidation recognizes the investor's share of the joint venture's liabilities directly on the balance sheet, while the equity method does not. This results in higher reported liabilities under proportionate consolidation. - **Income**: Both methods recognize the same net income effect, just presented differently. - **Net Assets**: The equity method shows the investment as a single line item, while proportionate consolidation shows the underlying net assets. Therefore, proportionate consolidation results in higher reported liabilities compared to the equity method.

Author: LeetQuiz Editorial Team