When Applying the Rules of the Equity Method,the Long-Term Investments

question 3

Multiple Choice

When applying the rules of the equity method,the Long-term Investments account is credited for the receipt of a cash dividend because ________.

• A)the dividend decreases the investor's investment
• B)it increases the investor's investment
• C)there is an increase in dividend liability
• D)the dividend increases the total assets

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Definitions:

Present Value

The current worth of a future sum of money or stream of cash flows given a specified rate of return, used to assess the value of future cash flows in today's dollars.

Recognition

The formal acknowledgment in accounting of a transaction or event's impact on the financial statements.

Net Assets

The total assets of an organization minus its total liabilities, representing the owners' residual interest in the company's assets.