Gumble Ltd

question 2

Multiple Choice

Gumble Ltd. has owned 65% of the common shares of Lopez for several years. This year, Gumble reduced its interest in Lopez to 10%. Which of the following statements is true?

• A)Gumble must change from reporting under consolidation to the equity method.
• B)Gumble must change from reporting under consolidation to the cost method.
• C)Gumble must change from reporting under the equity method to the cost method.
• D)Gumble is not required to change its reporting method.

Determine the financial impact of replacing or disposing of equipment.

Grasp the basic principles of relevant revenues and costs in decision making.

Understand the implications of accepting special orders on company operations.

Comprehend the concept of sunk costs and how they influence financial decisions.

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Definitions:

Wage Compression

A situation where differences in wages between employees become small, often because of external pressures, leading to reduced pay gaps between new and experienced employees, or between different job roles.

Annual Basis

Refers to calculations, measurements, or assessments made over the course of a year.

Increased Turnover

A higher rate at which employees leave a company and are replaced, which can indicate dissatisfaction or a dynamic job market.

Compa-ratio

A comparative ratio used in compensation management to determine an employee's pay relative to the midpoint of the market or their pay grade.