Which of the Following Statements Is Correct

question 72

Multiple Choice

Which of the following statements is correct?

• A) When the equity method is used to account for an investment in an investee, the reported share of investee income must be added to net income on the statement of cash fiows.
• B) When the equity method is used to account for an investment in an investee, the cash dividends received are cash inflow from investing activities.
• C) Any realized or unrealized gains or losses that were reported on the statement of earnings under the market value method must be removed from net income in the operating activities section of the statement of cash flows.
• D) When the equity method is used to account for an investment in an investee, the reported share of investee dividends must be deducted from net income on the statement of cash flows.

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Definitions:

Wholesaler

An intermediary entity in the distribution channel that buys goods in bulk from manufacturers and sells them to retailers or other businesses, but not directly to consumers.

Contra Account

A contra account is an account used in the general ledger to reduce the value of a related account when the two are netted together.

Accumulated Depreciation

The total amount of a company's asset value that has been allocated as depreciation expense since the asset was put into use.

Closing Entries

Journal entries made at the end of an accounting period to transfer temporary account balances to permanent accounts, thus preparing the books for the next period.