When the Cost Method of Accounting for Long-Term Investment in Shares

question 17

Multiple Choice

When the cost method of accounting for long-term investment in shares is employed,the receipt of a dividend on those shares is recorded as a credit to:

• A) the investment asset.
• B) dividend revenue.
• C) dividend declared.
• D) retained profits.

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Definitions:

Present Discounted Value

The current value of a future sum of money or stream of cash flows given a specified rate of return, used in time value of money calculations.

Direct Costs

Expenses that can be directly traced to the production of a specific good or service, such as materials and labor.

Economic Profit

The difference between a firm's total revenue and its total costs, including both explicit and implicit costs, measuring the firm's overall financial performance.

Entrepreneurial Alertness

An entrepreneur's ability to notice and take advantage of new business opportunities not seen by others.