Option (c) is the answer.
None of the given statements are correct.
Option (a) is incorrect as under the cost method, the investment is recorded at the historical cost or purchase price. When subsidiary declares a cash dividend, then it is treated as dividend income and investment account is not adjusted.
Option (b) is incorrect as under the cost method, the investment is recorded at historical cost only. There are no other adjustments in the investment account unless the fair value has declined below the cost.
QUESTION 10 Under the cost method, the investment account is reduced when a. the subsidiary declares a cash dividen...
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...
When is the carrying value of the investment account reduced under equity-method reporting? I would like to obtain an in depth explanation of this scenario.
Tuue ul lhe investment account reduced under equity-method reporting? What is a differential? How is a differential treated by an investor in computing income from an investee under (a) cost-method and (b) equity-method reporting? Turner M U4-2 LO 4-1 Q4-3
When a parent company uses the equity method to account for investment in a subsidiary, the amortization expense entry recorded during the year is eliminated on a consolidation worksheet as a component of Entry I. What is the necessity of removing this amortization? Please explain in detail.
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 the fair value method is used to account for an investment, the carrying value of the investment is affected by a neither the earnings nor the dividends of the investee b. the earnings and dividend distributions of the investe c. the periodic net income of the investee d. the dividend distributions of the investile All work saved 30 ROU o
Percy Company uses the complete equity method to record its investment. The difference between book value of equity acquired and the value implied by the purchase price was attributed solely to an excess of market over book values of depreciable assets, with a remaining life of 10 years. Exercise 4-1 Percy Company purchased 80% of the outstanding voting shares of Song Company at the beginning of 2014 for $406,000. At the time of purchase, Song Company's total stockholders' equity amounted...
a) use the cost method for investment in singer B)use the partial equity method to record its investment. c)use the complete equity method to record its investment. please do all 3 parts and show work. c)uses the complete equity method to record its investment. Problem 4-1 On January 1, 2011, Perelli Company purchased 90,000 of the 100,000 outstanding shares of common stock of Singer Company as a long-term investment. The purchase price of $4,934,300 was paid in cash. At the...
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...
Parent purchased Subsidiary on January 1, 2015. The parent uses the equity method to account for its investment in its subsidiary. The excess of investment cost over book value was allocated as follows: Equipment (20-yr life) $ 130,000 Customer list (10-yr life) 184,000 Patent (10-yr life) 147,000 Goodwill 139,000 Total $ 600,000 Parent regularly sells merchandise to Subsidiary. In 2017, inter-company sales amounted to $50,100, with $16,300 of deferred profit remaining in ending inventory. Year-end inter-company receivables/payables amounted to $18,900....