The Equity Method Records the Initial Purchase of an Investment

question 77

Multiple Choice

The equity method records the initial purchase of an investment in voting common stock at _____. Each period, the investor treats as revenue its share of the _____ of the investee.The investor treats dividends declared by the investee as _____.

• A)acquisition cost; dividends; income
• B)acquisition cost; periodic earnings; a reduction of the investor's investment in stock of the investee account
• C)present value of future cash flows; dividends; a reduction of the investor's investment in stock of the investee account
• D)present value of future cash flows; periodic earnings; a reduction of the investor's investment in stock of the investee account
• E)future value of present cash flows; dividends; a reduction of the investor's investment in stock of the investee account

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Definitions:

Management

The process of coordinating and overseeing the operations and activities of an organization or business to achieve defined objectives.

Unanimous Agreement

An agreement or decision made with the approval of all parties involved, indicating total consensus without any dissent.

Disclosure

The act of making new or significant information known, particularly in legal and corporate contexts, where transparency is required by law or policy.

Principal

The main party to a transaction, obligation, or financial instrument, in contrast to an agent or intermediary.