Which of the Following Is a True Statement

question 7

Multiple Choice

Which of the following is a true statement?

• A) When actual price is greater than expected price, a favorable variance results
• B) When expected price is greater than actual price, a favorable variance results
• C) When expected price is equal to actual price, a favorable variance results
• D) None of these are true statements

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Definitions:

Minority Active Investment

An investment where the investor holds a non-controlling interest in a company but is still actively involved in its management or operations.

Equity Method

An accounting technique used for recording investments in associate companies where the investment is initially recognized and subsequently adjusted for the investor’s share of the net assets of the investee, including recognized income or loss.

Cost Method

An accounting method used to record investments in which the investment is recorded at its acquisition cost without recognizing subsequent changes in market value.

Investment Method

A technique for recognizing the investor's share of investee profits and adjusting the carrying amount of the investment accordingly.