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:

Standard of Value

A base for comparison that allows the determination of the economic value of goods and services.

Short Run

A period in economics during which some factors of production are fixed, limiting the immediate ability of businesses to expand or change production levels.

Long Run

Refers to a period in which all factors of production and costs are variable, allowing for the full adjustment to changes.

Monetary Growth

The increase in the quantity of money in an economy over time, which can influence inflation and economic activity.