Homework Answers
Correct Answer is option b.
Equity method is used when the investor has significant influence over the investee company. Significant influence is anywhere between 20% to 50% holdings. Investment of less than 20% holding may also have significant influence, in such case also equity method is used.
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If 25% of the common stock of an investee company is purchased as a long-term investment,...
if 25% of the common stock of an investee company is purchased as a long-term investment, the appropriate method of...
if 25% of the common stock of an investee company is purchased as a long-term investment, the appropriate method of accounting for the investment is a. the cost method. b. the equity method. C. the preparation of consolidated financial statements. d. determined by agreement with whomever owns the remaining 90% of the stock. On January 1, 2020, Jamestina Corp. paid $1,800,000 for 100,000 shares of Belinda Company's common stock, which represents 25% of Belinda's outstanding common stock. Belinda reported net...
Question 6 If the cost method is used to account for a long-term investment in common...
Question 6 If the cost method is used to account for a long-term investment in common stock, dividends received should be credited to the Dividend Revenue account. debited to the Stock Investments account. recorded only when 20% or more of the stock is owned. credited to the Stock Investments account. Question 7 If 10% of the common stock of an investee company is purchased as a long-term investment, the appropriate method of accounting for the investment is determined by agreement...
Stock Inv Stock Investments Loss on Sale of Stock Investments Cash.. . d. 25% of the...
Stock Inv Stock Investments Loss on Sale of Stock Investments Cash.. . d. 25% of the common stock of an investee company is purchased as a long-term investment, the appropriate method of accounting for the investment is a. the cost method. b. the equity method. C. the preparation of consolidated financial statements. d. determined by agreement with whomever owns the remaining 90% of the stock, 6) On January 1, 2020, Jamestina Corp. paid $1,800,000 for 100,000 shares of Belinda Company's...
D Question 3 4 pts Rome Company owns 65% of the outstanding common stock of London...
D Question 3 4 pts Rome Company owns 65% of the outstanding common stock of London Company. Rome would report its investment in London Company's common stock: as Trading Securities. as Held to Maturity Securities. under the equity method of accounting as Investments for significant influence. by preparing Consolidated Financial Statements.
Peel Company received a cash dividend from a common stock investment. Should Peel report an increase...
Peel Company received a cash dividend from a common stock investment. Should Peel report an increase in the investment account if it carries the investment at fair value or if it uses the equity method of accounting? Fair Value Equity a. No No b. Yes Yes c. Yes No d. No Yes An investor uses the equity method to account for an investment in common stock. Assume that (1) the investor owns less than 50 percent of the...
Investor company owns 35% of investee company voting stock and accounts for the investment under the...
Investor company owns 35% of investee company voting stock and accounts for the investment under the equity method. investors share of investees current net loss exceeds the balance in the investment account. investor should in most cases A. Lower of cost or market, with unrealized gains and losses include in earnings. B. Fair value, with unrealized gains included in earnings only to the extent of previously recognized unrealized losses unless accounting alternative is elected.. C. Fair value, with unrealized gains...
Investor company owns 35% of investee company voting stock and accounts for the investment under the...
Investor company owns 35% of investee company voting stock and accounts for the investment under the equity method. investors share of investees current net loss exceeds the balance in the investment account. investor should in most cases A. Always recognize a loss equal to 35% of investor's net loss. B. Recognize a loss equal to the remaining balance in the investment account C. Maintain a record of any unrecognized losses to be applied against future net income of the invested...
Tresh Company purchased 42,000 shares of common stock of Mann Corporation as a long-term investment for...
Tresh Company purchased 42,000 shares of common stock of Mann Corporation as a long-term investment for $1,000,000. During the year, Mann Corporation reported net income of $200,000 and paid dividends of $80,000. Instructions (a) Assuming that the 42,000 shares represent a 15% interest in Mann Corporation: 1. Prepare the journal entry to record the investment in Mann stock. 2. Prepare any entries that Tresh Company should make in accounting for its investment in Mann stock during the year. 3. What...
10) P Company purchased 90% of the outstanding common stock of S Company on January 1,...
10) P Company purchased 90% of the outstanding common stock of S Company on January 1, 2013 . S Company’s stockholders’ equity at various dates was: 1/1/13 1/1/17 12/31/17 Common stock $400,000 $400,000 $400,000 Retained earnings 120,000 380,000 460,000 Total $520,000 $780,000 $860,000 The workpaper entry to establish reciprocity under the cost method in the preparation of a consolidated statements workpaper on December 31, 2017 should include a credit to P Company’s retained earnings of: a) $80,000. b) $234,000. c)...
Passive investments in equity Securities die readily marketable investments that management intends to hold for extended...
Passive investments in equity Securities die readily marketable investments that management intends to hold for extended periods. always long-term investments. current assets that require the equity method of accounting for investments Investments with no influence on the investee. 2 pts Question 12 Dewey Inc. owns 64% of Felicity Corporation's outstanding voting stock. Dewey should account for its investment in Felice using: the fair value method the cost method consolidated financial statements. the mark-to-market method 2 pts Question 13 that When...
if 25% of the common stock of an investee company is purchased as a long-term investment, the appropriate method of accounting for the investment is a. the cost method. b. the equity method. C. the preparation of consolidated financial statements. d. determined by agreement with whomever owns the remaining 90% of the stock. On January 1, 2020, Jamestina Corp. paid $1,800,000 for 100,000 shares of Belinda Company's common stock, which represents 25% of Belinda's outstanding common stock. Belinda reported net...
Stock Inv Stock Investments Loss on Sale of Stock Investments Cash.. . d. 25% of the common stock of an investee company is purchased as a long-term investment, the appropriate method of accounting for the investment is a. the cost method. b. the equity method. C. the preparation of consolidated financial statements. d. determined by agreement with whomever owns the remaining 90% of the stock, 6) On January 1, 2020, Jamestina Corp. paid $1,800,000 for 100,000 shares of Belinda Company's...
D Question 3 4 pts Rome Company owns 65% of the outstanding common stock of London Company. Rome would report its investment in London Company's common stock: as Trading Securities. as Held to Maturity Securities. under the equity method of accounting as Investments for significant influence. by preparing Consolidated Financial Statements.
Passive investments in equity Securities die readily marketable investments that management intends to hold for extended periods. always long-term investments. current assets that require the equity method of accounting for investments Investments with no influence on the investee. 2 pts Question 12 Dewey Inc. owns 64% of Felicity Corporation's outstanding voting stock. Dewey should account for its investment in Felice using: the fair value method the cost method consolidated financial statements. the mark-to-market method 2 pts Question 13 that When...
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