Answered: The market value option (fair value…

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

ChapterA2: Investments

Section: Chapter Questions

Problem 12MCQ: When the market value of a companys available-for-sale securities is lower than its cost, the...

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Mf2.

-The market value option (fair value option)

a. Does not apply to investments in bonds classified as available for sale

b. Does not apply to investments in bonds classified as hold until maturity. expiration

c. Does not apply to investments in common shares accounted for using the equity method

d. The three previous alternatives are incorrect..

-Which of these changes in the method of accounting for investments in common stock requires a retroactive adjustment to the balance of the investment?

a. Change from “fair value through net income” to “equity method”

b. Change from “equity method” to “fair value through net income”

c. Both "a" and "b" are correct.

d. Neither "a" nor "b" are correct

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