When an Investor Uses the Equity Method to Account for Investments

question 59

Multiple Choice

When an investor uses the equity method to account for investments in common stock,the investment account will be increased when the investor recognizes

• A) a proportionate share of the net income of the investee.
• B) a cash dividend received from the investee.
• C) periodic amortization of an intangible arising from contractual rights acquired in the purchase.
• D) depreciation related to the excess of market value over book value of the investee's depreciable assets at the date of purchase by the investor.

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Definitions:

Carrier Protein

A type of membrane protein involved in facilitated diffusion, helping to transport substances across a cell membrane without expenditure of energy.

Sodium Ion

An atom of sodium that has lost one electron to form a positively charged ion (Na+), crucial for nerve transmission and fluid balance in the body.

LDL Cholesterol

Low-density lipoprotein cholesterol, often referred to as "bad" cholesterol, which can accumulate and form plaques in arteries, leading to cardiovascular disease.

Receptor-Mediated Endocytosis

A type of endocytosis in which extracellular molecules become bound to specific receptors on the cell surface and then enter the cytoplasm enclosed in vesicles. Compare with phagocytosis and pinocytosis.