ZuoTi.Pro
Question

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 company.

D. Both B & C

business   accounting   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

Answer. D. Both B and C

As per equity method, if Investors share of Investees current net loss exceeds the balance in the investment account then investor should in most cases recognize a loss equal to the remaining balance in the investment account and maintain a record of any unrecognized losses to be applied against future net income of the invested company.

0 0
Add a comment
Know the answer?
Add Answer to:
Investor company owns 35% of investee company voting stock and accounts for the investment under the...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • 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 Corporation owns 30% of Investee Corporation. Investee had net earnings of $100,000 during the year...

    Investor Corporation owns 30% of Investee Corporation. Investee had net earnings of $100,000 during the year and paid dividends of $30,000. Investor's Investment in Investee account contained a $70,000 balance at the beginning of the year. What would be the correct balance of this account at the end of the year?

  • An investor owns 25% of an investee, and accounts for its investment using the equity method....

    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...

  • An investor owns 25% of an investee, and accounts for its investments using the equity method....

    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...

  • Equity method journal entries with intercompany sales of inventory An investor owns 25% of an investee,...

    Equity method journal entries with intercompany sales of inventory 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 $2,000,000. During the year, the investee reported net income of $800,000 and paid dividends of s200,000. In addition, the investor sold inventory to the investee, realizing a gross profit of $240,000 on the sale. At the end of...

  • Consider the following scenerio: an investor owns 30% of an investee company. The remaining 70% is...

    Consider the following scenerio: an investor owns 30% of an investee company. The remaining 70% is owned by the investee's founder who has managed the company since its inception and takes no direction from "outsiders." How should the investor account for its investment?

  • Question 4 (25 points) On January 1, 2018, Investor Company purchased Investee Company bonds with a...

    Question 4 (25 points) On January 1, 2018, Investor Company purchased Investee Company bonds with a face value of $660,000. Investor Company paid $628,295.58 in cash for the investment. Investor Company treated the investment as Available-For-Sale. The bonds mature on December 31, 2020. The bonds pay 10% interest each December 31. At the time of the purchase, the market rate for bonds of identical risk and maturity was 12% Investor Company prepared the following amortization table for the bonds. Date...

  • Assume that on January 1, 2013, an investor company acquired 100% of the outstanding voting common...

    Assume that on January 1, 2013, an investor company acquired 100% of the outstanding voting common stock of an investee company. The following financial statement information is for the investor company and the investee company on January 1, 2013, prepared immediately before this transaction. Book Values Investor Investee Receivables & inventaries $150,000 $75,000 Land 300,000 150,000 Property & equipment 337,500 150,000 Total assets $787,500 $375,000 Liabilities $225,000 $120,000 Common stock ($2 par) 30,000 15,000 Additional paid-in capital 420,000 225,000 Retained...

  • On January 1, 2018, an investor company acquired 30% of an investee company’s common stock for...

    On January 1, 2018, an investor company acquired 30% of an investee company’s common stock for $600,000. As a result of this transaction, the investor can exert significant influence over the investee. During each year ended December 31, 2018 and 2019 the investee reported $120,000 of net income and $50,000 of dividends. On January 1, 2018, the book value of the investee’s net assets was $2,000,000 and all individual net assets had appraised fair values that equaled their reported book...

  • 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...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT