FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Question
Which of the following does not indicate an investor company's ability to significance an investee?
A. Technological dependency
B. Material intra-entity transactions
C. Interchange of personnel
D. The investor owns 30 percent of the investee but another owner holds the remaining 70 percent
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- Accounting 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_forwardThe method of accounting for subsidiaries where investment income is limited to dividends received is the a. cost method. b. simple equity method. c. investment method. d. sophisticated equity method.arrow_forwardCompany A exchanges equipment with Company B, resulting in a gain for company A. The transaction has commercial substance. Which of the following statements is TRUE regarding this transaction as it related to company A? The entire amount of the gain would be recognized Only a part of the gain would be recognized None of the gain would be recongnized Because the transaction has commercial substance. Company A is in the same economic position as it was before the exchange took place.arrow_forward
- what are intra-entity transfers? How do you treat intra-entity transfers while consolidating the financial statements of a parent company and its subsidiary?. Discuss with suitable examples.arrow_forwardWhich of the following multiples are well-constructed for valuing either the enterprise or equity value of a firm? Group of answer choices a) enterprise value/EBITDA b) equity value/ EPS c) enterprise value/Net Income d) enterprise value/Salesarrow_forwardIdentify which standard of comparison, (a) intracompany, (b) competitor, (c) industry, or (d) guidelines,best describes each of the following examples. Compare Ford’s return on assets to GM’s return on assets.arrow_forward
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