Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

7. Receivables and Investments

Introduction to Investments in Securities

Financial Accounting

7. Receivables and Investments

Introduction to Investments in Securities

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Multiple Choice

Please choose the statement that is incorrect regarding portfolio and passive investments:

Passive investments are generally reported at fair value on the balance sheet.

Passive investments are accounted for using the equity method.

Portfolio investments do not provide the investor with significant influence over the investee.

Portfolio investments typically involve ownership of less than 20% of another company's voting stock.

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Verified step by step guidance

Step 1: Understand the key concepts of portfolio and passive investments. Portfolio investments typically involve ownership of less than 20% of another company's voting stock and do not provide the investor with significant influence over the investee. Passive investments are generally reported at fair value on the balance sheet.

Step 2: Review the equity method of accounting. The equity method is used when an investor has significant influence over the investee, typically indicated by ownership of 20% to 50% of the voting stock. Passive investments do not meet this criterion and are not accounted for using the equity method.

Step 3: Analyze the statements provided in the problem. Compare each statement to the definitions and accounting treatments of portfolio and passive investments to identify which statement is incorrect.

Step 4: Focus on the statement 'Passive investments are accounted for using the equity method.' This statement contradicts the definition and accounting treatment of passive investments, as they are reported at fair value and do not use the equity method.

Step 5: Conclude that the incorrect statement is 'Passive investments are accounted for using the equity method,' based on the mismatch between the statement and the established accounting principles for passive investments.