An Investor Uses the Cost Method of Accounting for Its

question 7

Multiple Choice

An investor uses the cost method of accounting for its investment in common stock.During the current year,the investor received $25,000 in dividends,an amount that exceeded the investor's share of the investee company's undistributed income since the investment was acquired.The investor should report dividend income of what amount?

• A)$25,000
• B)$25,000 less the amount in excess of its share of undistributed income since the investment was acquired
• C)$25,000 less the amount that is not in excess of its share of undistributed income since the investment was acquired
• D)None of the above is correct.

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Definitions:

Direct Materials

Raw materials that are directly traceable to the production of a specific good or service.

Incremental Revenues

Additional revenue that a company generates from selling more units of its products or services.

Special Order

A request for a product or service that is not part of a company’s standard offering, often requiring customization or special handling.

Opportunity Cost

The potential benefits an individual, investor, or business misses out on when choosing one alternative over another.