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:

Confirmation Bias

The tendency to search for, interpret, favor, and recall information in a way that confirms one's preexisting beliefs or hypotheses.

Conjunction Fallacy

A logical fallacy where people incorrectly judge the probability of the conjunction of two events to be more likely than the probability of either event alone.

Gambler's Fallacy

A cognitive bias where an individual erroneously believes that past events will affect the likelihood of future independent events, often seen in probability contexts.

Bilingualism

The ability to fluently speak two languages.