If an Investment Accounted for Using the Equity Method Suffers

question 36

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) None; once an investment has been written down, it cannot subsequently be written up.
• 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)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.

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Definitions:

Accounts Receivable Balance

Accounts receivable balance is the total amount of money owed to a company by its customers for goods or services that have been delivered but not yet paid for.

Payment Collections

The process of gathering payments or receivables from clients or customers.

Dun & Bradstreet Report

A report generated by Dun & Bradstreet that provides detailed financial and operational information on businesses, used for credit analysis.

Financial Statements

Formal records of the financial activities and condition of a business, person, or other entity, usually comprising the balance sheet, income statement, and cash flow statement.