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:

Indirect Labor

This term describes labor costs not directly associated with the production of goods or services, such as maintenance and supervisory personnel.

Factory Utilities

Expenses associated with the utilities consumed in a factory, such as electricity, gas, and water, used during the manufacturing process.

Overhead Allocation Base

A measure or criterion used to distribute overhead costs among various products, services, or departments.

Direct Labor Hours

These hours represent the amount of time worked directly on the production of goods or services, used to allocate labor costs to products or services.