A Company Has Been Using the Fair-Value Method to Account

question 39

Multiple Choice

A company has been using the fair-value method to account for its investment. The company now has the ability to significantly control the investee and the equity method has been deemed appropriate. 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 be recorded as revenue.

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Definitions:

Ex-Confederate States

Refers to the Southern states that seceded from the United States to form the Confederacy during the American Civil War and were later readmitted to the Union.

Paternalism

A policy or practice of treating or governing people in a fatherly manner, especially by providing for their needs without giving them rights or responsibilities.

13th Amendment

Amendment to the United States Constitution, ratified in 1865, which abolished slavery and involuntary servitude, except as punishment for a crime.

Emancipation

The act of being freed from restraint, bondage, or slavery, often used in the context of the abolition of slavery in the United States.