When using the equity method to account for an investment, cash dividends received by the investor from the investee should be recorded:
Multiple Choice
As a reduction in the investment account.
As an increase in the investment account.
As dividend income.
As a contra item to stockholders' equity.
When using the equity method to account for an investment, cash dividends received by the investor...
An investor uses the equity method to account for an investment in common stock. The investor's equity in the earnings of the investee is affected by A Change in Fair Cash Dividends Value of the Investee's from Investee Common Stock o o o 3
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 outstanding common stock of the investee, (2) the investee company reports net income and declares dividends during the year, (3) the fair value of the investee’s stock is unchanged during the year, and (4) the investee’s net income is more than the dividends it declares. How would the investor’s investment in the common stock...
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...
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...
An investor owns 25% of an investee, and accounts for its investment using the equity method. At the beginning of the year, the Equity Investment was reported on the investor's balance sheet at $1,500,000. During the year, the investee reported net income of $600,000 and paid dividends of $150,000. In addition, the investor sold inventory to the investee, realizing a gross profit of $180,000 on the sale. At the end of the year, 30% of the inventory remained unsold by...
Under the equity method, the investor a) debits the Revenue from Investments when the investee reports income U b) must debit the Equity Investments account when a dividend is received c) must record its share of the investee's net income o d) must use the LIFO method for tax purposes
Equity method journal entries (price greater than book value) An investor purchases a 30% interest in an investee company, and the investor concludes that it can exert significant influence over the investee. The book value of the investee's Stockholders' Equity on the acquisition date is $500,000, and the investor purchases its 30% interest for $195,000. The investor is willing to pay the purchase price because the investee owns an unrecorded (internally developed) patent that the investor estimates is worth $150,000....
Equity method mechanics with other comprehensive income An investor company owns 40% of the outstanding common stock of an investee company, which allows the investor to exercise significant influence over the investee. The Equity Investment was reported at $650,000 as of the end of the previous year. During the year, the investor received dividends of $70,000 from the investee. The investee reports the following income statement for the year: Revenues $2,300,000 Expenses 1,800,000 Net income 500,000 Other comprehensive income 100,000...
An investor owns 25% of an investee, and accounts for its investments using the equity method. At the beginning of the year, the equity investment was reported on the investors balance sheet at $1,000,000. During the year the investee reported net income of $400,000 and paid dividends of $100,000. In addition the investor sold inventory to the investee realizing gross profit of $120,000 on the sale. At the end of the year 30% of the inventory remained unsold by the...
QUESTION 16 In a situation where the investor does not exercises significant influence over the investee, which of the following entries is not actually posted to the books of the investor? (1) Debit to the investment account, and a Credit to the Equity in investee Income account Debit to Cash for dividends received from the investeel and a Credit to Investment income account Lilly Debit to Cash for dividends received from the investeel and a Credit to the Dividend Receivable...