Each Transaction Listed in 1 Through 4 Below Relates to a Long-Term

question 80

Essay

Each transaction listed in 1 through 4 below relates to a long-term investment in equity securities. Select the letters of the accounting effects (a through h) and place them in the space provided. Transactions may have more than one answer.
$\quad$ $\quad$ $\quad$ $\quad$$\text { Accounting Terms }$
a. Increase assets
b. Increase shareholders' equity (Contributed Capital)
c. Increase shareholders' equity (Retained Earnings)
d. Decrease liabilities
e. Decrease shareholders' equity (Retained Earnings)
f. Decrease assets
g. Increase liabilities
h.The event is not communicated nn financial statements
_____ 1. Using the equity method, the market price of the investment increases above its cost.
_____ 2. Using the mark-to-market method, the market price of the investment increases above its cost.
_____ 3. Using the equity method, the investee company recognizes a net loss for the year.
_____ 4. An investment in a 40%-owned subsidiary is sold for more than its carrying value.

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Definitions:

Nationalized

Refers to industries or assets that have been transferred from private to government ownership.

Best Interest

A principle that guides decisions by prioritizing the benefits and welfare of those affected over other considerations.

Society

A community of individuals living together and interacting under shared norms, values, and institutions.

Profit Maximizes

The technique a firm uses to determine the most profitable price and quantity of production.