Which of the Following Is Not True When the Fair

question 22

Multiple Choice

Which of the following is not true when the fair value option is elected for an investment that would normally be accounted for under the equity method?

• A) No journal entry need be made to recognize the investor's portion of the investee's net income.
• B) Unrealized holding gains and losses on that investment are recognized in net income.
• C) No journal entry need be made to recognize the investor's portion of dividends paid by the investee.
• D) All of these answer choices are true.

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Definitions:

Horizontal

In economic terms, horizontal integration refers to the process of a company increasing production of goods or services at the same part of the supply chain.

Corporate Restructuring

A broad term describing a number of ways in which companies are reorganized. Includes capital restructuring, mergers, and reorganizations in bankruptcy as well as changes in certain methods of doing business.

Capital Structure

The composition of a company's liabilities and shareholders' equity, which could include debt, common equity, preferred equity, among other securities, used to finance its operations and growth.

Divestitures

The process of selling off subsidiary business interests or investments as a strategic move for a company.