The Fair Value Method of Accounting for Stock

question 29

Multiple Choice

The fair value method of accounting for stock

• A) recognizes dividends as income
• B) is only appropriate as part of a consolidation
• C) requires the investment be increased by the reported net income of the investee
• D) requires the investment be decreased by the reported net income of the investee

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Definitions:

Potential Creditors

Individuals or institutions that may lend money or extend credit to a company or individual.

Present Value

The existing financial estimate of a future quantity of money or stream of cash flows, with a certain return rate taken into account.

Annuity

A financial product that pays out a fixed stream of payments to an individual, typically used as part of a retirement strategy.

Compound Interest

Interest that accumulates on the initial amount invested and on the interest that has previously been added to that amount.