Which Method of Accounting Initially Recognises the Investment at Cost

question 21

Multiple Choice

Which method of accounting initially recognises the investment at cost and then adjusts the investment for the post- acquisition changes in the investor's share of net assets of the investee?

• A)investment method
• B)entity method
• C)equity method
• D)cost method

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Definitions:

Activity Base

A measure or quantity (such as machine hours, labor hours, or materials used) that is directly associated with the costs incurred by an activity or process.

Managerial Accountants

Professionals specializing in accounting who analyze financial information to inform strategic business decisions, focusing on the management of internal financial processes.

Entity

Refers to any individual, company, organization, or legal body that has a recognizable, separate existence for legal or tax purposes.

Direct Materials

Fundamental components directly linked to the creation of specific goods or offerings.