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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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Discuss the appropriate accounting treatment to use when (a) an investor acquires enough additional common stock during a year to change from accounting for the investment at fair value to using the equity method and (b) an investor using the equity method sells enough common stock so that its portion of ownership falls below 20%.

a.

To determine

Explain the suitable accounting treatment to be used when an investor acquires enough additional common stock during a year to change from accounting for the investment at fair value to using the equity method.

Explanation

Investor should use the equity method when he acquires required additional common stock during the current year to change from the accounting from an equity investment at fair value to using the equity method. Under this equity method, the investor restates the investment by giving...

b.

To determine

Explain the suitable accounting treatment to be used when an investor using the equity method sells enough common stocks so that its portion of ownership falls below 20%.

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