When the Equity Method of Accounting for Investments Is Used

question 167

Multiple Choice

When the equity method of accounting for investments is used by the investor, the amortization of additional depreciation due to differences between book values and fair values of investee assets on the date of acquisition:

• A) Reduces the investment account and increases investment revenue.
• B) Increases the investment account and increases investment revenue.
• C) Reduces the investment account and reduces investment revenue.
• D) Increases the investment account and reduces investment revenue.

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Definitions:

Object Permanence

The understanding that objects continue to exist even when they cannot be observed.

Scheme

A plan or strategy designed with a specific aim or outcome in mind, often outlining steps or methods to achieve it.

Violation of Expectations

A method used in developmental psychology to study infants' understanding of the world by gauging their reactions to events that deviate from what they anticipate.

Event

An occurrence or happening, often significant in nature.