The Cost Method of Accounting for Investments in Stock Should

question 71

Multiple Choice

The cost method of accounting for investments in stock should be employed when the

• A) investor owns more than 50% of the investee's stock.
• B) investor has significant influence on the investee and the stock held by the investor are marketable equity securities.
• C) market value of the shares held is greater than their historical cost.
• D) investor's influence on the investee is insignificant.

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Definitions:

International Bond

Any bond sold outside the country of the borrower. There are two types of international bonds: Eurobonds and foreign bonds.

Eurobonds

International bonds that are denominated in a currency not native to the country where it is issued, allowing investors and issuers to access global capital markets.

Foreign Bonds

Bonds issued in a domestic market by a foreign entity, in the currency of the domestic market, as a way for the issuer to raise capital.

Foreign Exchange Market

The Foreign Exchange Market is a global decentralized or over-the-counter market for trading currencies, determining the foreign exchange rates for every currency.