How Should a Permanent Loss in Value of an Investment

question 45

Multiple Choice

How should a permanent loss in value of an investment using the equity method be treated?

• A) The equity in investee income is reduced.
• B) A loss is reported in the same manner as a loss in value of other long-term assets.
• C) The investor's stockholders' equity is reduced.
• D) No adjustment is necessary.
• E) Record an offset to cash.

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Definitions:

Pessimistic

Having a tendency to see the worst aspect of things or believe that the worst will happen.

Oral Stage

In Freudian psychoanalysis, an early life stage focusing on the pleasures and frustrations associated with the mouth, sucking, and being fed.

Characteristic Personality Traits

Features that are distinctive and describe consistent behaviors in a person across different situations and over time.

Primary Process

In psychoanalytic theory, the unconscious thought processes that are primitive and symbolic, driven by the pleasure principle.