Pond Corporation Uses the Fair Value Method of Accounting for Its

question 21

Multiple Choice

Pond Corporation uses the fair value method of accounting for its investment in Swan Company.Which one of the following events would affect the Investment in Swan Co.account?

• A)Investee losses
• B)Investee dividend payments
• C)An increase in the investee's share price from last period
• D)All of the above would affect the Investment in Swan Co.account.

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Definitions:

Amortization

The process of spreading out a loan into a series of fixed payments over time, or the gradual write-off of the cost of an intangible asset over its useful life.

Bond Premium

The amount by which the market price of a bond exceeds its face value, typically resulting when market interest rates are lower than the bond's coupon rate.

Interest Expense

The cost incurred by an entity for borrowed funds, reflecting the interest payments on debt obligations.

Operating Line

A revolving credit facility extended by a bank to a business to fund its day-to-day operations.