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PART TWO lo be solved on sheet #2. 1. In which cases should the company discontinue applying the equity method for accounting an investment? What is the line by line method? 2.
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Company should discontinue the use of equity method for investments when 1 Use of equity method is no longer appropriate because the investee company operates under severe long term restriction that significantly impair its ability to transfer funds to the company (investor) 2 company ceases to have significant influence (less than 20% of equity) but retains, either in whole or in part, its investment Line by line method is consolidation method, when a company having more than 50% of controlling interest i.e. 50% participation in equity then company records proportionate assets, liabilities, revenue and expenses of investee company example : company A has 60% controlling interest in company B. Then company A records 60% of assets, liabilities, revenue & expense to extent of 60% And or remaining it shows as minority investment

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