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:

Corporate Profits

The excess of revenues over expenses for corporations, indicating the financial health and performance of companies.

Depreciation

A method of allocating the cost of a tangible asset over its useful life.

Social Security

A government program designed to provide financial support to individuals during retirement, disability, or upon the death of a breadwinner.

Highway Building

The process of designing, creating, and constructing roads and highways, often undertaken to improve transportation infrastructure.