If an Investment Is Owned 100%, Which Methods Will Result

question 27

Multiple Choice

If an investment is owned 100%, which methods will result in the same income and shareholders' equity appearing on the financial statements?

• A)Cost and consolidation.
• B)Equity and consolidation.
• C)Cost and equity.
• D)Each method results in different income and shareholder's equity amounts.

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Definitions:

Annual Net Cash Inflows

The total cash inflows minus the cash outflows for a business within a one-year period.

Useful Life

The estimated period over which an asset is expected to be usable by a business.

Purchase Machinery

The acquisition of machines or equipment for the production of goods or services.

Discount Rate

This is the discount rate used in the process of discounted cash flow analysis to find out the current value of cash flows expected in the future.