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Each Transaction Listed in 1 Through 4 Relates to an Investment

Question 73

Essay

Each transaction listed in 1 through 4 relates to an investment in a long-term equity security. Place the letter that corresponds to the effect (a through h) the transaction has on the accounting equation in the space provided. You may use each letter more than once or not at all.
\quad \quad \quad \quad \quad \quad \quad Accounting Effects
a. +A +A and +L +L
b. +A +\mathrm{A} and +SE +\mathrm{SE} (Contributed Capital)
c. +A +\mathrm{A} and +SE +\mathrm{SE} (Retained Earnings)
d. A -A and L -L
e. A -\mathrm{A} and SE -\mathrm{SE} (Contributed Capital)
f. A -A and - SE (Retained Earnings)
g. +A +\mathrm{A} and A -\mathrm{A}
h \mathrm{h} . The event is not reported on financial statements.
____ 1. Under the mark-to-market method, the investee company declares a cash dividend.
____ 2. Under the equity method, the investee company declares a cash dividend.
____ 3. Under the mark-to-market method, the investee company recognizes net income.
____ 4. Under the equity method, the investee company recognizes net income.

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