When the Cost Method Is Used to Account for a Stock

question 42

Multiple Choice

When the cost method is used to account for a stock investment the carrying value of the investment is affected by

• A) the earnings of the investee.
• B) the dividend distributions of the investee.
• C) the earnings and dividend distributions of the investee.
• D) neither the earnings nor the dividends of the investee.

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Definitions:

Factor Weights

Numbers assigned to variables based on their importance, used in mathematical models and decision-making processes to reflect the relative significance of different factors.

Variable Cost

Charges that adjust in relation to the amount of goods produced or level of enterprise activity.

Output Volume

The quantity of goods or services produced by a company, industry, or economic sector during a specified period.