When an Investor, Using the Equity Method, Pays More Than

question 73

Multiple Choice

When an investor, using the equity method, pays more than its share of the investee's book value, the difference is

• A) ignored.
• B) accounted for on the investor's books by a debit to Goodwill.
• C) accounted for on the investee's books by a debit to Goodwill.
• D) requires that the investor's Investment account and any investment income from the associate be adjusted over time.

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Definitions:

Difference Threshold

The smallest amount by which a stimulus must be changed in order to notice that the change has occurred, also known as the just noticeable difference (JND).

Stimulus Level

The intensity of a stimulus which may influence the response it elicits from an organism or process.

Just Noticeable Difference

The smallest change in the intensity of a stimulus that can be detected.

Weber's Law

A principle in psychology stating that the just-noticeable difference in a stimulus is proportional to the magnitude of the original stimulus.