Under the Equity Method, Which of the Following Statements Is

question 31

Multiple Choice

Under the Equity Method, which of the following statements is TRUE?

• A) The parent's investment in the subsidiary is recorded at cost, and only changed thereafter if there has been a permanent impairment in the value of the investment.
• B) The parent records its pro rata share of the subsidiary's post-acquisition income as an increase to the investment account and reduces the investment account with its share of the dividends declared by the subsidiary.
• C) The parent records its pro rata share of the subsidiary's cumulative earnings as an increase to the investment account and reduces the investment account with its share of the dividends declared by the subsidiary.
• D) The parent's investment in the Subsidiary is recorded at Cost and reduced by any excess dividends received from the subsidiary.

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Definitions:

Product Complexity

The degree to which a product is difficult to understand, use, or maintain by the average consumer.

Selling Teams

Combinations of sales specialists whose primary duties are order getting, order taking, or sales support but who work together to service important accounts.

Sales Growth

The increase in sales over a specific period, indicating the success and expansion of a business.

Company Sales Force

The team or department within a company responsible for conducting sales and reaching out to customers.