A Change from the Cost Method to the Equity Method

question 21

Multiple Choice

A change from the cost method to the equity method of accounting for an investment in common stock resulting from an increase in the number of shares held by the investor requires:

• A) only a footnote disclosure.
• B) that the cumulative amount of the change be shown as a line item on the income statement, net of tax.
• C) that the change be accounted for as an unrealized gain included in other comprehensive income.
• D) retroactive restatement as if the investor always had used the equity method.

Comprehend the income-generating process of a company.

Identify the key elements of financial performance measurement.

Understand the principles underlying the calculation and interpretation of financial ratios.

Grasp the concept of risk in investment and its implications on expected returns.

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Definitions:

Antisocial

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Substance Use Disorders

A condition characterized by an unhealthy dependence on drugs or alcohol leading to significant impairments.

Sociocultural

Relating to or involving the combination of social and cultural factors.

Methadone Maintenance

A treatment for opioid addiction that involves the long-term prescribing of methadone as an alternative to the opioid on which the individual is dependent.