When an Investor Purchases Sufficient Common Stock to Gain Significant

question 43

Multiple Choice

When an investor purchases sufficient common stock to gain significant influence over the investee,what is the proper accounting treatment of any excess of cost over book value acquired?

• A) The excess remains in the asset account until the investment is sold.
• B) The excess is immediately charged to expense in the period in which the investment is made.
• C) The excess is amortized over the period of time that is reasonable in light of the underlying cause of the excess.
• D) The excess is charged to retained earnings at the time the investor resells the common stock.

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Definitions:

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The set of rules, principles, and processes that govern the structure of sentences in a given language, especially in terms of word order and punctuation.

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A stage of language development in young children in which they use two-word sentences with high-content words, omitting smaller, less important ones.

Proposition

An assertion that communicates a conviction or opinion, and has the potential to be accurate or erroneous.

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