If a company uses the equity method to account for an investment in another company, which of the following is true? Income is combined proportionate to ownership. Income to the investing company consists of actual dividends, interest, or capital gains. All of the investee’s income is included in the investor’s income except for income relating to intra-entity transactions. Income of the investee is included in the investor’s income but reduced by any dividends paid to the investor.

The equity method is used when a company has ownership in another company of 20% to 50% of the…

Answered: If a company uses the equity method to…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

State whether the following statements are true or false and justify your answer in each case: a) The investor's relative exposure to the risks and rewards of the investee is known as the investor's 'extent of equity ownership' in the investee. b) The investor's 'extent of equity ownership' in the investee determines whether the investee is equity accounted. consolidated or simply measured as an investment in the investor's consolidated financial statements. c) The investor's degree of influence over an investee increases as the investment changes from a simple investment to a subsidiary. finally reaching the strongest degree of influence when the subsidiary becomes an associate. d) An investment over which the investor has significant influence is called an associate. e) An investee that is jointly controlled by the investor is called a subsidiary. f) The only instance where the investor may equity account for its investee is when such an investee is classified as an associate. g)…
Which financial instrument represents ownership in a corporation and entitles the holder to a share of the companys profits? a. Bond b. Preferred Stock c. Common Stock d. Debenture
Expenses 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 acquired
Which of the following characteristics of a corporation limits a stockholder's loss to the amount of his or her investment in the stock of the corporation? a. Separate legal entity b. Separation of ownership and management c. Transferability of ownership d. Limited liability
How can sole proprietorship, corporate and limited ability have an impact on the financial statement? How does each one of them might raise capital?
n 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.
Which of the following has no affect on the Accumulated Adjustments Account (AAA) and stock basis of a shareholder of an 5 Corporation? Ordinary Income. Cost Of Goods Sold. O Long-Term Capital Gain. Repayment of loan by the S Corporation made by a shareholder.
which characteristics of a corporation limits a stockholder's loss to the amount of his or her investment in the stock of the corporation ?

Recommended textbooks for you

FINANCIAL ACCOUNTING

Accounting

ISBN:

9781259964947

Author:

Libby

Publisher:

MCG

Accounting

ISBN:

9781337272094

Author:

WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Publisher:

Cengage Learning,

Accounting Information Systems

Accounting

ISBN:

9781337619202

Author:

Hall, James A.

Publisher:

Cengage Learning,

FINANCIAL ACCOUNTING

Accounting

ISBN:

9781259964947

Author:

Libby

Publisher:

MCG

Accounting

ISBN:

9781337272094

Author:

WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Publisher:

Cengage Learning,

Accounting Information Systems

Accounting

ISBN:

9781337619202

Author:

Hall, James A.

Publisher:

Cengage Learning,

Horngren's Cost Accounting: A Managerial Emphasis…

Accounting

ISBN:

9780134475585

Author:

Srikant M. Datar, Madhav V. Rajan

Publisher:

PEARSON

Intermediate Accounting

Accounting

ISBN:

9781259722660

Author:

J. David Spiceland, Mark W. Nelson, Wayne M Thomas

Publisher:

McGraw-Hill Education

Financial and Managerial Accounting

Accounting

ISBN:

9781259726705

Author:

John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS

	Income is combined proportionate to ownership.
	Income to the investing company consists of actual dividends, interest, or capital gains.
	All of the investee’s income is included in the investor’s income except for income relating to intra-entity transactions.
	Income of the investee is included in the investor’s income but reduced by any dividends paid to the investor.