Under Which of the Following Scenarios Would an Entity Not

question 96

Multiple Choice

Under which of the following scenarios would an entity not be classified as a variable interest entity?

• A) The equity investing firms do not have the obligation to absorb the expected losses of the variable interest entity if they occur.
• B) The investing firms do not have the right to receive the expected residual returns of the variable interest entity if they occur.
• C) The total equity investment at risk is sufficient to permit the variable interest entity to finance its activities without additional subordinated financial support from other parties.
• D) The equity investing firms do not have the direct or indirect ability to make decisions about the variable interest entity's activities through voting rights or similar rights.

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Definitions:

Rental Price

The cost associated with renting a property, such as an apartment or a car.

Normal Good

A type of good for which demand increases as the income of individuals or the economy increases.

Income

Payments obtained regularly from employment or investment returns.

Demand Curve

A visual depiction of how the price of a product influences the amount consumers are willing to buy.