When the Equity Method Is Used to Account for a Long-Term

question 14

Multiple Choice

When the equity method is used to account for a long-term investment in the stock of another company,the carrying value of the investment is affected by

• A)declines in the market value of the stock.
• B)the earnings and dividends of the investee.
• C)an excess of market price over cost.
• D)neither the earnings nor the dividends of the investee.

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Definitions:

Unfair Business Practices

Actions undertaken by businesses that are deceptive, misleading, or unethical, often to gain an advantage over consumers or competitors.

Penalties

Fines or other forms of punishment imposed on individuals or organizations for breaking laws or regulations.

Sale Of Goods Act

Legislation that regulates the sale of goods, ensuring certain standards of quality and fitness for purpose among other sales rights and duties.

Consumer Protection Legislation

Laws and regulations designed to ensure the rights of consumers are protected and to promote fair trade, competition, and accurate information in the marketplace.