Cucumber Company Concluded at the Beginning of 2016 That the Company's

question 97

Multiple Choice

Cucumber Company concluded at the beginning of 2016 that the company's ownership interest in PickelCo had decreased to the point that it became appropriate to begin accounting for its investment as available for sale,rather than using the equity method as it had been doing.The balance in the investment account is $75,000 at the time of the change,and accountants working with company records determined that the balance would have been $50,000 if the investment had been accounted for as an available-for-sale investment.At the time of implementing the change to the available-for-sale method,if financial statements were prepared:

• A)Net income and retained earnings will be lower by $25,000.
• B)Net income will be unchanged,and retained earnings will be lower by $25,000.
• C)The accounts will be unchanged,because no adjustment is necessary.
• D)Other comprehensive income and accumulated other comprehensive income will be lower by $25,000.

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Definitions:

Consume Goods

The act of using up goods and services for personal needs or consumption.

Save Money

The practice of reducing expenditures or setting aside funds to increase financial security or for future use.

Net Present Value

Net Present Value (NPV) is a financial metric that calculates the present value of all cash flows associated with a project, including both inflows and outflows, to determine its profitability.

Interest Rate

The percentage at which interest is paid by a borrower for the use of money that they borrow from a lender.