Escalators Present in a Contract Must State

question 6

Multiple Choice

Escalators present in a contract must state:

• A)at what interval the contract price should automatically change at a fixed rate.
• B)when the price will change and by what formula the new price will be calculated.
• C)when the contract should be terminated and how the cost of termination should be shared.
• D)when the contract should be renewed and the terms governing the renewal.

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Definitions:

Fair Value Adjustment

An accounting process of updating the book value of an asset or liability to reflect its current market value.

Joint Venture

A business arrangement in which two or more parties agree to pool their resources for the purpose of accomplishing a specific task or project.

Cost Method

A method of accounting that records the investment at its original cost and recognizes income when dividends are received.

Equity Method

An accounting technique used to record investments in which the investor has significant influence over the investee but does not control it outright.