Under the U

question 13

Multiple Choice

Under the U.S.accounting rules, the following conditions were required to consider special purpose entities (SPEs) to be independent parties:

• A)Independent investment of less than 3% of the SPE's equity and independent control of the SPE
• B)Independent investment of at least 3% of the SPE's equity and independent control of the SPE
• C)Substantive investment of at least 3% of the SPE's equity and independent control of the SPE
• D)Independent investment of at least 3% of the SPE's assets at risk and independent control of the SPE
• E)Substantive investment of less than 3% of the SPE's assets at risk and independent control of the SPE

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Definitions:

Depletion

The systematic allocation of the cost of natural resources over the period of their extraction and sale.

Natural Resource

Materials or substances such as minerals, forests, water, and fertile land that occur in nature and can be used for economic gain.

Depreciable Asset

An asset that loses value over time due to usage, wear and tear, or obsolescence, which can be an expense on the income statement over its useful life.

Fixed Asset

A long-term tangible piece of property or equipment that a firm owns and uses in its operations to generate income.