All of the Following Statements Regarding Accounting for Equity Investments

question 12

Multiple Choice

All of the following statements regarding accounting for equity investments with controlling influence are true except:

• A)These investments are accounted for using fair values with unrealized gains and losses reported in other comprehensive income.
• B)The parent uses the consolidation method.
• C)The controlling investor is called the parent.
• D)Consolidated financial statements show the financial statements of all entities under the parent's control,including all subsidiaries.
• E)An investor who owns more than 50% of a company's voting stock has control over the investee.

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Definitions:

Direct Method

A method of reporting cash flows from operating activities by showing major classes of gross cash receipts and payments.

Accounts Receivable

Receivables from customers to a business for goods or services that have been supplied but payment has not been made.

Sales Revenue

The total amount of money generated from the sale of goods or services by a company before any costs or expenses are deducted.

Direct Method

A way of allocating service department costs directly to the producing departments without considering services rendered between service departments.