Answered: Which method should be used to account…

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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Which method should be used to account for a 16 % ownership in another company's voting stock , assuming the company buying the stock wants to control the decisions of the other company ? Equity Trading Held - to - maturity Available - for - sale How should a company classify debt securities acquired by a corporation which are accounted for by recognizing unrealized holding gains or losses that are included in long - term investments ? trading debt securities never - sell debt securities Oheld - to - maturity debt securities available - for - sale debt securities Under the equity method of accounting for investmentswhat must the company purchasing the shares record each period? percentage of net income ) reported and dividends paid Its percentage of estimated earnings and dividends declared The change in market value of the shares owned NothingNo entries are made in the equity method except at the time of purchase. What effect will transferring investments from the available-for-sale to the trading portfolio have on stockholder's equity? None. The transfer is made at the book value of the investment. The unrealized gain or loss on the transfer date will become part of retained earnings. The unrealized gain or loss will be recorded in a Fair Value Adjustments account. The unrealized gain or loss will become part of Other Comprehensive Income.

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