When an Investment Accounted for Under the Equity Method Is

question 20

True/False

When an investment accounted for under the equity method is sold, the gain or loss reported on the statement of earnings is the difference between the selling price and its original cost.

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Definitions:

Shareholders Before Creditors

This principle dictates that in the hierarchy of corporate structure, shareholders' equity is ranked lower than the claims of creditors in the event of a liquidation.

Ordinary Unsecured Creditor

A creditor who has no special rights to assets of a debtor in the event of the debtor's bankruptcy.

Trade Creditors

Entities to whom money is owed for goods and services provided on credit as part of normal business operations.

Liquidator's Remuneration

The compensation paid to a liquidator for their services in administrating the process of winding up a company's affairs and distributing its assets.