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

question 123

Multiple Choice

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

• A)Retrospectively adjusted to the balance that would have existed if the equity method had been in effect for prior years.
• B)Carried over as is with no adjustment necessary.
• C)Carried over at fair value on date of transfer.
• D)Adjusted to reflect amortized cost.

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Definitions:

Equipment Intensive

Describes operations, industries, or activities that require a significant amount of machinery, tools, or equipment to produce goods or services.

Small-batch Production

A manufacturing process that involves producing goods in small quantities, allowing for greater flexibility and customization.

Worker Skill

The expertise, abilities, and competencies that a worker possesses, which determine their capability to perform tasks efficiently and effectively.

Competitive Advantage

The attributes or conditions that allow a company to produce goods or services better or more cheaply than its competitors, leading to a favorable market position.