Which One of the Following Statements Is False

question 18

Multiple Choice

Which one of the following statements is false?

• A) Under the equity method, revenue is recognized when net income is earned by the associate.
• B) When the equity method is used to account for an investment in shares, dividends received are accounted for as a reduction in the investment account.
• C) Under the equity method, the investment account is adjusted annually for a portion of associate's net income and for dividends received.
• D) Under the equity method, revenue is recognized when net income is earned by the investor which may not be when it is earned by the investee.

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Definitions:

Total Profit

The total revenue of a business after subtracting all costs and expenses related to its operation.

Profit Per Unit

Profit per unit is the amount of money earned from selling one unit of a product or service, calculated by subtracting the cost per unit from the selling price per unit.

Break-even Point

The level of production at which total revenues equal total costs, resulting in neither profit nor loss.

Efficiency

Conditions under which maximum output is produced with a given level of inputs.