Which of the Following Results in an Increase in the Investment

question 108

Multiple Choice

Which of the following results in an increase in the investment account when applying the equity method?

• A) Unrealized gain on intra-entity inventory transfers for the prior year.
• B) Unrealized gain on intra-entity inventory transfers for the current year.
• C) Dividends paid by the investor.
• D) Dividends paid by the investee.
• E) Sale of a portion of the investment during the current year.

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Definitions:

Production Function

An equation that describes the maximum amount of output that can be derived from a set number of inputs.

Diminishing Marginal Product

The principle that says the marginal product of a factor of production decreases as the quantity of the factor is increased, holding all else constant.

Economies of Scale

Cost advantages reaped by companies when production becomes efficient, as the scale of production and the cost per unit of production decrease.

Average Total Cost

The total cost of production divided by the number of units produced, representing the per-unit cost of production.