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FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Because of the acquisition of additional investee shares, an investor will now change from the fair-value method to the equity method. Which procedures are applied to accomplish this accounting change?
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- 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_forwardWhich activities changes equity but does not affect a corporation's assets and liabilities?arrow_forwardExpenses in acquiring another company may be related to the issuance of stocks , legal , financial and accounting expenses . Explain how each of those expenses are treated in the books of the acquiredarrow_forward
- Which of the following results in an increase in the Equity in the Investee Income acct. when applying the equity method? Amortizations of purchase price over book value on date of purchase Amortization since date of purchase of purchase price over book value on date of purchase Sale of portion of the investment at a gain to the investor Investors share of gross profit from intra-entity inventory sale for the prior year Sale of a portion of the investment at a lossarrow_forwardwhich of the following may be revoked by the board of directors after it has been declared? a) A share dividend b) An equitable distribution. c) a property prescription. d) a cash dividendarrow_forwardn reference to intercompany transactions between an investor and an investee, when the investor can significantly influence the investee, which of the following statements is correct, assuming that the investor is using the equity method? Question 9Answer a. As long as the investor recognizes the effects of the transaction in its financial statements, it is notrequired to provide any additional disclosures. b. In reporting its share of earnings and losses of an investee, the investor must eliminate the effect of profits and losses on the intercompany transactions until they are realized. c. None of the others are correct. d. There is the presumption of arms-length bargaining between the related parties.arrow_forward
- Explain the adjustments made in the equity method when the fair value of the net assets underlying an investment exceeds their book value at acquisition.arrow_forwardThe pre-emptive right of a common stockholder is the right to?arrow_forwardIf the equity method is used to account for an investment in common shares O net income of the investee is ignored by the investor. O net income of the investee is recorded as realized gains, but dividends received are credited to the investment account. the investment account may be at times greater than the acquisition cost. O it is presumed that the investor has no significant influence on the investee.arrow_forward
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