Explain the Difference Between GNP and NNP

question 65

Essay

Explain the difference between GNP and NNP. Explain why NNP is sometimes a better measure of how the economy is doing than GNP is.

Understand the accounting treatments for equity method and cost method investments.

Grasp the concept of recognizing unrealized gains or losses and their reporting.

Understand the implications of dividends on investments and equity earnings calculations.

Know how to adjust the available-for-sale security portfolio to fair value and its reporting on financial statements.

---

Definitions:

Recognized Gain

An increase in the value of an asset that has been sold or deemed to have increased in value officially on financial statements.

Selling Price

The amount for which a product or service is sold, not necessarily equal to the cost or intrinsic value of the item.

Carrying Value

The book value of an asset or liability on a company's balance sheet, calculated as the original cost minus depreciation or amortization.

Intra-Entity Inventory Sales

Sales transactions of inventory between divisions or subsidiaries within the same parent company, not affecting consolidated financial results until sold externally.