If the Cost Method Is Used to Account for a Long-Term

question 136

Multiple Choice

If the cost method is used to account for a long-term investment in ordinary shares,

• A) it is presumed that the investor has significant influence on the investee.
• B) the earning of net income by the investee is considered a proper basis for recognition of income by the investor.
• C) net income of the investee is not considered earned by the investor until dividends are declared by the investee.
• D) the Investment account may be, at times, greater than the acquisition cost.

Interpret and analyze financial information to make informed business decisions related to sales, costs, and profit.

Understand the principles and applications of the percentage-of-completion method and completed contract method in revenue recognition.

Recognize the role of payments, including interest and progress payments, in the accounting for installment sales and construction contracts.

Identify criteria for revenue recognition, including the earned, realized, or realizable, and the critical event and measurability criteria.

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Definitions:

Palpation

The method of feeling with the hands and fingers during a physical examination to detect abnormalities within the body.

Percussion

A family of musical instruments played by striking them with the hand or a stick, or the act of tapping on a surface to diagnose the condition of the underlying structure in a body.

General Appearance

The overall look or external presentation of a person, which can be an indication of their health or condition.

Manipulation

The passive movement of a joint to determine the range of flexion and extension.