When the Cost Method Is Used to Account for an Equity

question 34

Multiple Choice

When the cost method is used to account for an equity investment, the carrying amount of the investment is affected by

• A)the profit of the investee.
• B)dividend distributions of the investee.
• C)both the profit and the dividend distributions of the investee.
• D)neither the profit nor the dividend distributions of the investee.

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Definitions:

Cognitive Moral Development

A theory that explains the stages through which individuals evolve in their ability to reason morally, from basic understanding to sophisticated ethical reasoning.

Social System

An organized and interdependent constellation of institutions, groups, and norms that collectively shapes the behaviors and relationships of individuals within a society.

Duty to Society

The responsibility of individuals and organizations to act in the best interests of the community at large, contributing positively to the welfare of others.

Social Contract

A theoretical agreement within a society or between the governed and the government, defining and limiting the rights and duties of each.