Which of the Following Is True Concerning the Accounting for a Foreign

question 18

Multiple Choice

Which of the following is true concerning the accounting for a foreign investment under the cost method?

• A)Investment income is translated at the exchange rate on the dividend declaration date.
• B)​Investment income is translated using the average exchange rate for the year.
• C)​Investment income is based on the investee's net income adjusted for the excess of purchase price over book value.
• D)​Investment income is based on the investee's net income without adjusting for the excess of purchase price over book value.

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Definitions:

Variable Costing

A financial recording approach that incorporates only variable manufacturing expenses, such as raw materials, direct workforce, and fluctuating production overheads, into the costs of goods produced.

Net Operating Income

A financial term representing the profit made from a company’s operations, after subtracting operating expenses from operating income.

Absorption Costing

The product cost determination method under this accounting strategy includes the expenses for direct materials, direct labor, and all manufacturing overhead, whether it is variable or fixed.

Gross Margin

A company's total sales revenue minus its cost of goods sold, divided by the total sales revenue, expressed as a percentage.