Advanced Accounting 14th Edition
14th Edition
ISBN: 9781260726442
Author: By Joe Ben Hoyle And Thomas Schaefer And Timothy Doupnik
Publisher: Mc Grawhill Education
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Textbook Question
Chapter 1, Problem 2Q
A company acquires a rather large investment in another corporation. What criteria determine whether the investor should apply the equity method of accounting to this investment?
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How would you describe a change that a company makes from the equity method to the fair-value method of accounting for investments?
How does a company determine whether to account for an equity investment using the fair value
method, equity method, or consolidation method?
Which of the following statements is TRUE regarding the equity method?
A. The equity method is used for reporting gains or losses for non-strategic investments.
B. The investor's share of the associate's dividends declared is reported as revenue.
C. The investor's investment in the associate changes in direct relation to the changes taking place in the associate's equity accounts.
D. The equity method reports unrealized gains and losses on revaluations to fair value in net income.
Chapter 1 Solutions
Advanced Accounting 14th Edition
Ch. 1 - What advantages does a company achieve when it...Ch. 1 - A company acquires a rather large investment in...Ch. 1 - What accounting treatments are appropriate for...Ch. 1 - Prob. 4QCh. 1 - Why does the equity method record dividends from...Ch. 1 - Prob. 6QCh. 1 - Smith. Inc., has maintained an ownership interest...Ch. 1 - Prob. 8QCh. 1 - Because of the acquisition of additional investee...Ch. 1 - Prob. 10Q
Ch. 1 - Prob. 11QCh. 1 - Prob. 12QCh. 1 - In a stock acquisition accounted for by the equity...Ch. 1 - Prob. 14QCh. 1 - What is the difference between downstream and...Ch. 1 - Prob. 16QCh. 1 - Prob. 17QCh. 1 - What is the fair-value option for reporting equity...Ch. 1 - When an investor uses the equity method to account...Ch. 1 - Prob. 2PCh. 1 - Prob. 3PCh. 1 - Under fair-value accounting for an equity...Ch. 1 - When an equity method investment account is...Ch. 1 - Prob. 6PCh. 1 - Prob. 7PCh. 1 - Prob. 8PCh. 1 - Evan Company reports net income of $140,000 each...Ch. 1 - Prob. 10PCh. 1 - Prob. 11PCh. 1 - Prob. 12PCh. 1 - Prob. 13PCh. 1 - Prob. 14PCh. 1 - Prob. 15PCh. 1 - Prob. 16PCh. 1 - Prob. 17PCh. 1 - Prob. 18PCh. 1 - Prob. 19PCh. 1 - Prob. 20PCh. 1 - Prob. 21PCh. 1 - Prob. 23PCh. 1 - Matthew, Inc., owns 30 percent of the outstanding...Ch. 1 - Prob. 26PCh. 1 - Prob. 28PCh. 1 - Prob. 29PCh. 1 - Prob. 30PCh. 1 - Prob. 31P
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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- IFRS requires companies to measure their financial assets at fair value except when based on: a. whether the equity method of accounting is used. b. whether the financial asset is a debt investment. c. whether the financial asset is an equity investment. d. whether an investment is classified as trading.arrow_forwardAnswer the following questions: Define and discuss the term "equity" What financial statement element, other than equity, is typically affected by owner investments and distributions?arrow_forwardWhat information do investors and creditors need when determining which companies will receive capital?arrow_forward
- The cost of equity is _______. A. the interest associated with debt B. the rate of return required by investors to incentivize them to invest in a company C. the weighted average cost of capital D. equal to the amount of asset turnoverarrow_forwardIFRS requires companies to measure their financial assets at fair value except when based on:(a) whether the equity method of accounting is used.(b) whether the fi nancial asset is a debt investment.(c) whether the fi nancial asset is an equity investment.(d) whether an investment is classifi ed as trading.arrow_forwardWhen an investor has significant influence over an investee, the investor must use the equity method of accounting to recognise the investee in its consolidated financial statements. (a) True (b) Falsearrow_forward
- When an investor has significant influence over an investee, the investor must use the equity method of accounting to recognise the investee in its consolidated financial statements. Select one: True Falsearrow_forwardBalance Sheet vs. Income Statement: Which financial statement is more significant to an outside investor when making a decision to invest in a prospective company? Give a rationale for it.arrow_forwardAccounting for equity investments in other entities depends crucially on the level of influence the investor holds on the investee. we learned how to account for equity investments where the investors obtain control over the investees. after that we learned the case where the investors can exert 'significant influence' over the investees. In the former case, the investor is required to consolidate the investee's financial statements, while in the latter the investor shall apply the 'equity method' to account for the investment. Discuss whether it is more desirable to require uniform accounting treatment for equity investments regardless of the level of influence the investor holds on the investee. (and is uniform accounting treatment the questions mentioned means the consolidated accounting?) Thanksarrow_forward
- investments in equity instruments are financial assets because they are a) cash equivalents b) contractual rights to receive cash or another financial asset from another entity c) contractual rights to exchange financial assets or financial liabilities with another entity under conditions that are potentially favourable to the entity d) an equity instrument of another entityarrow_forwardAn important element in accounting for investment securities concerns the distinction between its noncurrent and current classification. Required: a. Why do most companies maintain an investment portfolio consisting of both current and noncurrent securities? b. What factors should an analyst consider when evaluating whether investments in marketable equity securities are properly classified as current or noncurrent? How do these factors affect the accounting treatment for unrealized losses?arrow_forwardEquity accounting for intercorporate investment relies on book value. But if the ownership is an investment, how does fair value accounting enter in? Should it be considered at all?arrow_forward
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