When the Investor's Level of Influence Changes, It May Be

question 170

Multiple Choice

When the investor's level of influence changes, it may be necessary to change from the equity method to another method. When the level of ownership falls from a range of 20% to 50% to less than 20%, the equity method typically would be discontinued and the investment account balance would be carried over at:

• A) Amortized cost on the date of ownership change.
• B) Fair value on the date of ownership change.
• C) Discounted present value on the date of ownership change.
• D) The current balance, and this balance would serve as the new "cost."

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Definitions:

Price

The financial cost associated with acquiring a good, service, or asset.

Income

Funds obtained regularly from work performed or investments made.

Budget Line

The budget line represents the combination of goods and services that a consumer can purchase given their income and the prices of those goods and services.

Slope

A measure of the steepness or inclination of a line or curve, indicating the ratio of the vertical change to the horizontal change between two points on the line.