Gerken Company Concluded at the Beginning of 2013 That the Company's

question 167

Multiple Choice

Gerken Company concluded at the beginning of 2013 that the company's ownership interest in DillCo had increased to the point that it became appropriate to begin using the equity method to account for the investment. The balance in the investment account is $50,000 at the time of the change, and accountants working with company records determined that the balance would have been $75,000 if the account had been adjusted for investee net income and dividends as prescribed by the equity method. After implementing the change to the equity method, if financial statements were prepared:

• A)Net income and retained earnings will be higher by $25,000.
• B)Net income will be unchanged, and retained earnings will be higher by $25,000.
• C)Net income and retained earnings will be higher by $75,000.
• D)The accounts will be unchanged, because no adjustment is necessary.

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Definitions:

Workplace

A location or setting where employees perform their job duties, often structured to optimize productivity and employee well-being.

Generational Differences

Variations in attitudes, behaviors, expectations, and communication styles among individuals born in different eras.

Potential Source

An entity or individual that might serve as an origin or supplier of information, resources, or energy.

Ethical Violation

An act that goes against moral principles or established codes of conduct.