If the investment in subsidiary account is increased or decreased by the amount determined by the following calculation: the investment account is being converted from
A) cost to simple equity.
B) cost to sophisticated equity.
C) simple equity to sophisticated equity.
D) simple equity to cost.

Question

If the investment in subsidiary account is increased or decreased by the amount determined by the following calculation:  the investment account is being converted from
A) cost to simple equity. 
B) cost to sophisticated equity. 
C) simple equity to sophisticated equity. 
D) simple equity to cost.

Quizplus · Accepted Answer

The given calculation is the difference between the fair value of the investment and its cost. When the investment account is increased or decreased by this amount, it is being converted from cost to simple equity.

If the Investment in Subsidiary Account Is Increased or Decreased