A Company Has Been Using the Equity Method to Account

question 94

Multiple Choice

A company has been using the equity method to account for its investment. The company sells shares and does not continue to have significant control. Which of the following statements is true?

• A) A cumulative effect change in accounting principle must occur.
• B) A prospective change in accounting principle must occur.
• C) A retrospective change in accounting principle must occur.
• D) The investor will not receive future dividends from the investee.
• E) Future dividends will continue to reduce the investment account.

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Definitions:

Reminder

A prompt or cue that serves to bring a fact, event, or obligation back to one's consciousness.

Mirror Neurons

Neurons that fire both when an individual acts and when the individual observes the same action performed by another, thought to be related to understanding actions, empathy, and learning through imitation.

Emotions

Complex psychological states involving thoughts, feelings, physiological changes, and behaviors in response to stimuli.

Extinction

In behavioral psychology, the process by which a previously learned behavior is reduced and eventually disappears when reinforcement is no longer provided.