Current Attempt in Progress When a company holds between 20% and 50% of the outstanding stock of an investee, which of the following statements applies? O The investor should always use the fair value method to account for its investment. O The investor should always use the equity method to account for its investment. O The investor must use the fair value method unless it can clearly demonstrate the ability to exercise "significant influence" over the investee. O The investor should use the equity method to account for its investment unless circumstances indicate that it is unable to exercise "significant influence" over the investee.

Current Attempt in Progress When a company holds between 20% and 50% of the outstanding stock of an investee, which of the following statements applies? O The investor should always use the fair value method to account for its investment. O The investor should always use the equity method to account for its investment. O The investor must use the fair value method unless it can clearly demonstrate the ability to exercise "significant influence" over the investee. O The investor should use the equity method to account for its investment unless circumstances indicate that it is unable to exercise "significant influence" over the investee.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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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?) Thanks
In what way is a preferred stock usually more similar to a bond than to a common stock? O a. Preferred stockholders are more risky than common stocks O b. Preferred stockholders elect the board of directors of the organization O c. Preferred bondholders participate in the growth of the company through increases in dividends and stock prices O d. Preferred stockholders are typical entitled fixed payments O e. If the company were to go into liquidation, preferred stockholders will be entitled to payments after common stockholders are paid-off
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[S1] By executing a rights offering, we acknowledge the preemptive right of current ordinary shareholders. [S2] When an initial public offering has been made, the underwriter would remit to the issuing entity cash equal to the total issue price less any issuance cost chargeable against the former. *a. Only S1 is true.b. Only S2 is true.c. Both are true.d. Both are false.
If 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.