The Three Methods of Accounting for Stock Investments Are the Market

question 80

Multiple Choice

The three methods of accounting for stock investments are the market value method, the consolidation method, and the equity method. The appropriate method to use depends on the percentage of ownership. Which of the following statements is true?

• A)When the percentages of ownership are less than 20%, 20%- 50%, and greater than 50%, the market value method, consolidation method, and equity method should be used, respectively.
• B)When the percentages of ownership are less than 20%, 20%- 50%, and greater than 50%, the consolidation method, equity method, and market value method should be used, respectively.
• C)When the percentages of ownership are less than 20%, 20%- 50%, and greater than 50%, the market value method, equity method, and consolidation method should be used, respectively.
• D)When the percentages of ownership are less than 20%, 20%- 50%, and greater than 50%, the equity method, market value method, and consolidation method should be used, respectively.

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Definitions:

Utility Maximization

The economic principle that individuals or firms attempt to allocate their resources in a manner that maximizes their satisfaction or profit.

Marginal Utility

The supplementary enjoyment a consumer experiences when they consume an extra unit of a good or service.

Budget Constraints

Budget constraints represent the limitations on the spending choices of consumers based on their income and the prices of goods and services.

Total Utility

The overall satisfaction a consumer receives from consuming a particular quantity of goods or services.