If an Investment Accounted for Using the Equity Method Suffers

question 5

Multiple Choice

If an investment accounted for using the equity method suffers an impairment loss and the value in use of the investment subsequently recovers, what accounting entry should be made?

• A) It may be revalued to fair value with the revaluation gain going to other comprehensive income, even if the recorded gain will exceed the original impairment loss.
• B) It may be written up in value but not more than the amount of the impairment loss that was recorded at the time of impairment.
• C) It may be revalued to fair value with the revaluation gain going to net income, even if the recorded gain will exceed the original impairment loss.
• D) None; once an investment has been written down, it cannot subsequently be written up.

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Definitions:

Normative Social Influence

The impact of others that causes us to change our behavior to gain their approval and acceptance.

Informational Social Influence

The process of changing one’s behavior to align with the group's, based on the belief that the group possesses accurate information.

Social Facilitation

The tendency for people to perform differently when in the presence of others than when alone, often improving on simple tasks.

Deindividuation

A psychological state characterized by diminished self-consciousness, reduced concern for social evaluation, and weakened restraints against prohibited behaviors in groups.