The Cost Method of Accounting for Long-Term Investments in Stock

question 118

Multiple Choice

The cost method of accounting for long-term investments in stock should be employed when the

• A) investor owns more than 50% of the investee's stock.
• B) investor has significant influence on the investee and the stock held by the investor are marketable equity securities.
• C) market value of the shares held is greater than their historical cost.
• D) investor's influence on the investee is insignificant.

---

Definitions:

Disgust

An intense feeling of revulsion or profound disapproval aroused by something unpleasant or offensive.

Broaden-and-build Hypothesis

A theory in positive psychology that suggests positive emotions broaden one's awareness and encourage novel, varied, and exploratory thoughts and actions.

Broaden-and-build Theory

A psychological theory suggesting that positive emotions broaden one’s awareness and encourage novel, varied, and exploratory thoughts and actions, which over time build an individual’s personal resources.

Risk-as-feelings Hypothesis

The theory suggesting that people’s emotional responses to risky situations play a significant role in their decision-making processes, often overriding rational analysis.