For Accounting Purposes, the Method Used to Account for Long-Term

question 80

Multiple Choice

For accounting purposes, the method used to account for long-term investments in ordinary shares is determined by

• A) the amount paid for the shares by the investor.
• B) the extent of an investor's influence on the operating and financial affairs of the investee.
• C) whether the shares has paid dividends in past years.
• D) whether the acquisition of the shares by the investor was "friendly" or "hostile."

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Definitions:

EAR

Ear is the acronym for Effective Annual Rate, which measures the real return on an investment or the real interest rate on a loan, accounting for compounding over a specified period.

Monthly Stream

A monthly stream often refers to consistent or recurring flows of income, payments, or data that occur every month.

Discount Rate

An interest rate used to discount future cash flows to their present value, often central in determining the value of investments.

Trust Fund

A fund comprised of a variety of assets intended to provide benefits to an individual, group, or organization.