#1
What is the primary objective of equity investments accounting?
Maximizing revenue
Minimizing expenses
Achieving capital appreciation
Reducing liabilities
#2
What is the primary factor influencing the choice between the fair value method and the equity method for accounting for investments?
The investor's ownership percentage
The investee's industry
The age of the investments
The investor's credit rating
#3
What is the primary factor influencing the choice between the cost method and the equity method for accounting for investments?
The investor's ownership percentage
The investee's industry
The age of the investments
The investor's credit rating
#4
Which accounting method is commonly used for equity investments under the influence of significant influence but not control?
Fair value method
Equity method
Cost method
Cash basis method
#5
What does the term 'Available-for-Sale' refer to in equity investments accounting?
Investments held for trading
Investments with significant influence
Investments intended to be held for an indefinite period
Investments held for barter transactions
#6
What is the significance of the equity method in accounting for investments?
It is used for short-term investments only
It allows for the recognition of the investor's influence over the investee
It is primarily applied to government investments
It is used exclusively for real estate investments
#7
How are unrealized gains or losses on available-for-sale equity investments reported?
Recognized in the income statement
Recorded as adjustments to retained earnings
Not recognized until the investments are sold
Amortized over an extended period
#8
Which financial statement is directly impacted by changes in the fair value of available-for-sale equity investments?
Income statement
Balance sheet
Cash flow statement
Statement of retained earnings
#9
How is the fair value of an equity investment determined?
Based on the investor's preferences
Using the investee's historical cost
Market price on a quoted exchange or observable market data
Estimated by the investor without external references
#10
In equity investments accounting, what is the primary difference between the equity method and the fair value method?
Treatment of dividends
Timing of recognizing income
Applicability to different industries
Treatment of transaction costs
#11
How are dividends received from equity investments accounted for under the equity method?
Treated as interest income
Deducted from the investment's carrying amount
Recorded as revenue in the income statement
Not recognized until the investment is sold
#12
In equity investments accounting, what is the purpose of impairment testing?
To assess the fair value of investments
To determine the tax implications of investments
To evaluate the recoverability of the carrying amount of investments
To calculate the return on investment
#13
What is the treatment of transaction costs related to the acquisition of equity investments?
Expensed in the income statement
Added to the carrying amount of the investments
Deducted from the fair value of the investments
Ignored in accounting calculations
#14
Under the equity method, how is the investor's share of the investee's net income recognized?
As a reduction of the investor's investment account
As an increase in the investor's investment account
As a direct credit to the investor's bank account
As an addition to the investor's operating income
#15
In the context of equity investments, what does the term 'mark-to-market' refer to?
Adjusting the carrying amount of an investment to its current market value
Recording all investments at their historical cost
Ignoring market fluctuations in accounting
Applying the equity method exclusively
#16
What is the accounting treatment for dividends received from available-for-sale equity investments?
Recorded as interest income
Deducted from the fair value of the investments
Not recognized until the investments are sold
Treated as a reduction of the investment's carrying amount
#17
Under the equity method, when should an investor adjust its investment account for the investee's impairments?
Immediately upon the occurrence of impairments
At the end of the fiscal year
When the investor's share of losses exceeds its investment account
Only when mandated by regulatory authorities