Cucumber Company Concluded at the Beginning of 2009 That the Company's

question 102

Multiple Choice

Cucumber Company concluded at the beginning of 2009 that the company's ownership interest in PickelCo had decreased to the point that it became appropriate to begin accounting for their investment as available for sale, rather than using the equity method as they 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. After 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.the equity method balance becomes the new cost basis, but under AFS reporting the investment must be marked to fair value with unrealized gains and losses shown in other comprehensive income and accumulated other comprehensive income.

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Definitions:

Open Communication

The practice of freely sharing thoughts, feelings, and information with others in a straightforward and honest manner.

Preventative Facework

Communication strategies used to preemptively avoid embarrassment or loss of face in social interactions.

Protective Facework

Strategies employed to preserve an individual's self-image or public image during social interactions.

Corrective Facework

A communication strategy used to address and repair damage to a person's image or reputation after a social or normative transgression.