If the Cost Method Is Used to Account for a Long-Term

question 136

Multiple Choice

If the cost method is used to account for a long-term investment in ordinary shares,

• A) it is presumed that the investor has significant influence on the investee.
• B) the earning of net income by the investee is considered a proper basis for recognition of income by the investor.
• C) net income of the investee is not considered earned by the investor until dividends are declared by the investee.
• D) the Investment account may be, at times, greater than the acquisition cost.

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Definitions:

Narcissism

A personality trait characterized by an inflated sense of self-importance and a deep need for admiration and attention.

Grandiose View

An exaggerated self-perception of being superior, unique, or exceptional, often seen in narcissistic personality traits.

Self-awareness

Acquaintance with oneself, including character attributes, emotional experiences, underlying motivations, and personal wishes.

Catharsis

A therapeutic release of emotions, often achieved through expressing feelings and discussing personal experiences.