For Each of the Following Numbered Situations Below, Select the Best

question 118

Essay

For each of the following numbered situations below, select the best letter answer concerning accounting for investments:
(A.) Increase the investment account.
(B.) Decrease the investment account.
(C.) Increase dividend revenue.
(D.) No adjustment necessary.
(1.) Income reported by 40% owned investee.
(2.) Income reported by 10% owned investee.
(3.) Loss reported by 40% owned investee.
(4.) Loss reported by 10% investee.
(5.) Change from fair-value method to equity method. Prior income exceeded dividends.
(6.) Change from fair-value method to equity method. Prior income was less than dividends.
(7.) Change from equity method to fair-value method. Prior income exceeded dividends.
(8.) Change from equity method to fair-value method. Prior income was less than dividends.
(9.) Dividends received from 40% investee.
(10.) Dividends received from 10% investee.
(11.) Purchase of additional shares of investee.
(12.) Unrealized ending intra-entity inventory profits using the equity method.

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Definitions:

Variable Life Insurance

A type of life insurance where the policyholder can allocate a portion of premium dollars to a separate account comprised of various investment funds.

Universal Life Policies

A type of flexible permanent life insurance offering the low-cost protection of term life insurance as well as a savings element, which is invested to provide a cash value buildup.

Defined Contribution Plans

Retirement plans where the amount invested is defined up front, but the future benefit is not guaranteed, depending on investment performance.

Pension Funds

Financial programs that collect and invest contributions from employers and employees to provide retirement benefits to the employees.