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

question 41

Multiple Choice

If the cost method is used to account for a long-term investment in common stock

• 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.

---

Definitions:

Domestically

Pertaining to or occurring within a country's borders; not foreign or international.

Worldwide

Pertains to activities or operations that are carried out on a global scale, affecting or involving people from all over the world.

Services

Activities, benefits, or satisfactions offered for sale that are essentially intangible and do not result in the ownership of anything.

World Trade Organization

An international organization designed to supervise and liberalize world trade by providing a forum for negotiation and dispute resolution.