Investments Accounted for Using the Equity Method Are Initially Recorded

question 70

Multiple Choice

Investments accounted for using the equity method are initially recorded at:

• A) fair market value of the investee company multiplied by the percentage of ownership acquired
• B) the total of the investee's equity accounts multiplied by the percentage of ownership acquired
• C) cost
• D) the lower of the cost or fair market value as of the balance sheet date

Understand the first-in, first-out (FIFO) method in process costing.

Calculate equivalent units of production for conversion costs under FIFO.

Recognize how production costs impact the cost per equivalent unit under different costing methods.

Understand the differences between the weighted-average and FIFO methods in process costing.

---

Definitions:

Long Run

A period of time sufficiently long that all inputs or factors of production can be varied by firms, allowing them to fully adjust to market conditions.

Variable Costs

Expenses that vary directly with the amount of production or business activity.

Fixed Costs

Costs that do not change with the level of output or production, such as rent or salaries.

Average Fixed Costs

The total fixed costs of production divided by the number of units produced, showing how fixed costs per unit change with production levels.