Under the Equity Method

question 65

Multiple Choice

Under the equity method,

• A)the receipt of dividends from the investee results in an increase in the investment account.
• B)the receipt of dividends from the investee results in a credit to the Dividend Income account.
• C)the receipt of dividends from the investee results in an increase in the investment account and a credit to the Dividend Income account.
• D)the receipt of dividends from the investee reduces the carrying amount of the investment account.

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Definitions:

Consumer Surplus

The difference between the total amount that consumers are willing and able to pay for a good or service versus the total amount they actually pay.

Producer Surplus

The difference between what producers are willing to sell a good for and the actual price they receive, reflecting extra profit.

Relatively Elastic

Refers to a situation in which the demand or supply for a good or service greatly responds to changes in price.

Tax Incidence

Refers to the distribution of the economic burden of a tax between buyers and sellers in the market.