2. PAS 28 requires the use of the equity method. Under thismethod, an investment in associate or joint venture is initiallyat2.PAS 28 requires the use of the equity method. Undera.method, an investment in associate or joint venture is initiallyb.and subsequently measured atInitial measurement2. EninSubsequent measurementinitial cost, adjusted for the investor'sshare in the investee's changes ina.fair valuepeequitycost, adjusted for the investor's sharein the investee's changes in equityb.costC.fair value plusfair valuetransaction costsd.fair value plusinitial cost, adjusted for the investor'sshare in the investee's changes intransaction costsequity3.

Answer - Option B Initial measurement - Cost Subsequent measurement- Cost, adjusted for the investor…

Answered: method, an investment in associate or…

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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Following IFRS, which statement is false? Group of answer choices The revaluation surplus account is a specific account reported as an unrealized gain in the statement of comprehensive income. If the revaluation initially increases the long-term operating asset's carrying value, the firm records the difference between the carrying value and the fair value (the unrealized gain) in the revaluation surplus account. The revaluation surplus account is a specific account reported in other comprehensive income (OCI) in the statement of comprehensive income. If a long-term operating asset's fair value decreases in subsequent accounting periods, after an earlier write-up, the firm reduces the revaluation surplus if it exists.
The Equity Method of accounting for investments: a) Requires the investment asset to increase proportionally with the affiliates net income b) Requires the investment asset to decrease proportionally with the affiliates net loss c) Requires the investment asset to decrease proportionally with dividends received d) All of the above
Which of the following is a working capital management issue? O A. The choice of which long-term assets to purchase to meet the firm's business goals. O B. The appropriate amount of cash to hold. C. None of the above is a working capital management issue. O D. The proper mix of stocks and bonds to issue for financing assets.
1. Explain the concept of control and its relationship to ownership percentage 2. which criteria do you prefer to use to classify equity investments ( quantitative, qualitative, or a combination of both)? Explain your answer (you may wish to highlight the advantages and disadvantages of each one)
when preparing the consolidated financial statements, which of the following should be deducted from the group reserves? a. share in associate profit b. value of the loan from subsidary to associate c. group's share of sub-subsidary profit d. value of goodwill impairment expense
Current Attempt in Progress Equity investments that are accounted for under the cost model will result in O recognition of dividend income only when actually received. expensing transaction costs when incurred. O recognition of a gain or loss in other comprehensive income at disposal. O recognition of a gain or loss in net income at disposal.
Which model is typically used to estimate the cost of using external equity capital? Group of answer choices capital asset pricing model rate of return on perpetuity model arbitrage pricing theory model dividend valuation model
Ownership percentage can provide a reasonable explanation for the 1. Type of investment (financial influence, subsidiary.. etc) and 2. The appropriate method of accounting to use. Thoroughly explain this statement while giving examples.
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 loss
A. Which of the following is most closely associated with the cost of using assets? a. Asset utilization b. Sales revenue c. Proportion of debt and equity d. Average price B. Which of the following is most closely associated with the return on management’s use of assets? a. Cost of capital b. Mix of equity types c. Prime lending rate d. # of products sold
What is the fair-value option for reporting equity method investments? How do the equity method and fair-value accounting differ in recognizing income from an investee?
How does the % of ownership a company has in an investment affect them? Please explain.

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