The Fair Value Method of Accounting for Stock

question 29

Multiple Choice

The fair value method of accounting for stock

• A) recognizes dividends as income
• B) is only appropriate as part of a consolidation
• C) requires the investment be increased by the reported net income of the investee
• D) requires the investment be decreased by the reported net income of the investee

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Definitions:

Calcium Carbonate

A chemical compound with the formula CaCO3, a common substance found in rocks as the minerals calcite and aragonite (most notably as limestone) and is the main component of pearls and the shells of marine organisms, snails, and eggs.

Stalagmites

Mineral formations that rise from the floor of a cave due to the accumulation of material deposited by dripping water enriched with minerals.

Travertine

A form of limestone deposited by mineral springs, especially hot springs, often characterized by its terraced structure.

Impermeable Rocks

Rock formations that do not allow water to pass through due to their tight grain structure, such as granite or clay.