Choose the correct.Which of the following does not indicate an investor company’s ability to significantly influence an investee?a. Material intra-entity transactions.b. The investor owns 30 percent of the investee but another owner holds the remaining 70 percent.c. Interchange of personnel.d. Technological dependency.

Choose the correct.Which of the following does not indicate an investor company’s ability to significantly influence an investee?a. Material intra-entity transactions.b. The investor owns 30 percent of the investee but another owner holds the remaining 70 percent.c. Interchange of personnel.d. Technological dependency.

SWFT Essntl Tax Individ/Bus Entities 2020

23rd Edition

ISBN:9780357391266

Author:Nellen

Publisher:Nellen

Chapter18: Comparative Forms Of Doing Business

Section: Chapter Questions

Problem 5P

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Which one of the following is the least likely reason a company may acquire an ownership interest in another company? Select one: a.To benefit form an overvaluing of assets in the investee company b. To oust an inefficient management team c. To take advantage of operating and/or cost synergies d. To exercise an active role in the business' activities
Which of the following may provide evidence of significant influence even if the percentage of ownership interest is less than 20\% ? Representation on the board of directors or equivalent governing body of the investee Participation in policy-making processesincluding participation in decisions about dividends or other distributions transactions between the investor and the investee IV Interchange of managenal personnel V. Provision of essential technical information.
. It is a type of business combination wherein an investor, having an existing involvement in the investee, acquires additional investment in order to obtain control over the investee. a. Business combination achieved by contract alone b. Business combination achieved by mere exchanges of equity interests c. Business combination achieved in stages d. Baby step combination
Choose the correct. Under fair-value accounting for an equity investment, which of the following affects the income the investor recognizes from its ownership of the investee?a. The investee’s reported income adjusted for excess cost over book value amortizations.b. Changes in the fair value of the investor’s ownership shares of the investee.c. Intra-entity profits from upstream sales.d. Other comprehensive income reported by the investee.
Consolidated financial statements are required in which ofthe following situations?a. Only when a company can exert significant influenceover another company.b. Only when a company has a passive investment inanother company.c. Only when a parent company can exercise control overits subsidiary.d. None of the above.
Which of the following is closest to IFRS 3 Business Combinations definition of control? A company is deemed to have control over another only when it owns a majority of the voting shares of another company. B. A company is deemed to have control when it can elect a majority of the Board members of another company. C. Control is the ability to direct the activities of a company that most significantly affect the investor's returns. D. Control exists only when a company has the continuing power to determine the operating and financing policies of another company and attempts to exercise such powers.
Choose the letter of the correct answer: 1. In which of the following situations would an investor likely account for stock ownership in an investee using the equity method? A. The investor and the investee have many transactions with each other B. The investor owns 15 percent of the investee’s stock C. The investor and investee reside in close proximity to each other D. The investor has significant influence over the investee’s management policies 2. When the cost model/method is used to account for an investment, which of the following would not result in an adjustment to the amount recorded in the investment account? A. The investee declares a regular dividend B. The investor sells some of the stock C. The investee declares a liquidating dividend D. The stock’s market value decreases to a point where is it below the investor’s cost
When an investor owns 20% to 50% of the voting stock of an investee company, the investor is presumed to exercise significant influence over the investee unless there is evidence to the contrary. Describe some factors that could be evidence of significant influence? Describe some factors that could be evidence of a lack of significant influence
When a company holds between 20% and 50% of the outstanding stock of an investee, which of the following statements applies? The investor should use the equity method to account for its investment unless circumstances indicate that it is unable to exercise "significant influence" over the investee. The investor must use the fair value method unless it can clearly demonstrate the ability to exercise "significant influence" over the investee. The investor should always use the equity method to account for its investment. The investor should always use the fair value method to account for its investment.
The difference between subsidiaries and associates can be said to revolve aroundpower and control. Critically evaluate this statement, giving examples of when a parent company would consider investing in either a subsidiary or an associate.
Which of the following statements is CORRECT? a. Most business in the U.S. is conducted by corporations, and corporations' popularity results primarily from their favorable tax treatment. b. Corporations and partnerships have an advantage over proprietorships because a proprietor is exposed to unlimited liability, but the liability of all investors in the other types of businesses is more limited. c. Conflicts can exist between stockholders and managers, but potential conflicts are reduced by the possibility of hostile takeovers. d. A good goal for a firm's management is the maximization of expected EPS. e. For a stock to be in equilibrium, its intrinsic value must be greater than the actual market price.
Albaith is a public limited company working since 2000. The company wants to adapt the current purchasing power method to cater to the needs of the shareholders, suppliers, creditors and employees. In order to shift from the conventional cost system to Current Purchasing Power Accounting the manager of the Albaith forwarded few points to be considered by the Board of Directors. Kindly advise the board, which of the following point/s depicts the suitability of the method. a. The shareholders can keep the purchasing power of their investment intact. b. The method may be used when the aim is the maintenance of the purchasing power in general. c. All the given points depict suitability of the CPPA method. d. To assist decision-makers in evaluating trends, when data for a series are expressed in units of constant purchasing power