When the Cost Method Is Used to Account for a Stock

question 42

Multiple Choice

When the cost method is used to account for a stock investment the carrying value of the investment is affected by

• A) the earnings of the investee.
• B) the dividend distributions of the investee.
• C) the earnings and dividend distributions of the investee.
• D) neither the earnings nor the dividends of the investee.

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Definitions:

Banks

Financial institutions that accept deposits, offer loans, and provide other financial services.

Financial Institutions

Organizations that provide financial services, such as banks, insurance companies, and stock exchanges.

Open Market Operations

The buying and selling of government securities by a central bank as a means of controlling the money supply and influencing interest rates.

National Debt

The total amount of money that a country's government has borrowed, by various means, from the private sector and other governments.