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For Each Transaction Identify Which Effect the Transaction Is Most

Question 111

Matching

For each transaction identify which effect the transaction is most likely to cause. You may use each choice more than once or not at all.

Premises:
The mark-to-market method is used for an investment in long-term equity securities, and the investee company declares a cash dividend.
The equity method is used for an investment in long-term equity securities and the investee company declares a cash dividend.
The mark-to-market method is used for an investment in long-term equity securities and the investee company recognizes net income.
The equity method is used for an investment in long-term equity securities and the investee company recognizes net income.
Responses:
Increase in current ratio and earnings per share
Decrease in current ratio and earnings per share
Does NOT change the current ratio; increases earnings per share
Increases the current ratio; does NOT change earnings per share
Does not change the current ratio or earnings per share
Can’t determine the effect

Correct Answer:

Increase in current ratio and earnings per share
Decrease in current ratio and earnings per share
Does NOT change the current ratio; increases earnings per share
Increases the current ratio; does NOT change earnings per share
Does not change the current ratio or earnings per share
Can’t determine the effect
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