In the Process of Conversion from the Equity Method to the Fair

question 90

Multiple Choice

In the process of conversion from the equity method to the fair value method, the earnings or losses that the investor previously recognized under the equity method should:

• A) be ignored.
• B) be subtracted from the carrying value of the securities.
• C) remain as a part of the carrying amount of the investment.
• D) be shown in the income statement.

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Definitions:

Constant Rate

A fixed value of change in a quantity with respect to another quantity, often used in mathematics and economics to describe steady growth or decline.

Opportunity Cost

Missing potential benefits that could have been gained from unchosen options when deciding on one.

Production Possibilities

A graphical representation that shows the maximum combination of goods or services that can be produced with a fixed amount of resources.

Production Possibilities Frontier

A curve depicting all maximum output possibilities for two goods, given a set of inputs representing resource allocation.