Which of the following is a false statement about applying the equity method? O A. One of the disclosures necessary under the equity method of accounting for investments is the difference, if any, between the amount at which an investment is carried and the amount of underlying equity in net assets and the accounting treatment of the difference. OB. Depending on the circumstances, an investor may be required to account for an investment in voting common stock under the fair- value method even though the investor owns more than 20% of the voting common stock. OC. Company A owns 15% of Company B's voting common stock but did have significant influence until it acquired 10% more. Company A's investment, results of operations (current and prior periods presented), and retained earnings should be adjusted prospectively. OD. Company A owns 20% of Company B's voting common stock and sells 1%. Company A's investment, results of operations (current and prior periods presented), and retained earnings should be adjusted retroactively.

Which of the following is a false statement about applying the equity method? O A. One of the disclosures necessary under the equity method of accounting for investments is the difference, if any, between the amount at which an investment is carried and the amount of underlying equity in net assets and the accounting treatment of the difference. OB. Depending on the circumstances, an investor may be required to account for an investment in voting common stock under the fair- value method even though the investor owns more than 20% of the voting common stock. OC. Company A owns 15% of Company B's voting common stock but did have significant influence until it acquired 10% more. Company A's investment, results of operations (current and prior periods presented), and retained earnings should be adjusted prospectively. OD. Company A owns 20% of Company B's voting common stock and sells 1%. Company A's investment, results of operations (current and prior periods presented), and retained earnings should be adjusted retroactively.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Question

Which of the following is a false statement about applying the equity method?
O A. One of the disclosures necessary under the equity method of
accounting for investments is the difference, if any, between the
amount at which an investment is carried and the amount of
underlying equity in net assets and the accounting treatment of the
difference.
OB. Depending on the circumstances, an investor may be required to
account for an investment in voting common stock under the fair-
value method even though the investor owns more than 20% of the
voting common stock.
OC. Company A owns 15% of Company B's voting common stock but
did have significant influence until it acquired 10% more. Company
A's investment, results of operations (current and prior periods
presented), and retained earnings should be adjusted
prospectively.
OD. Company A owns 20% of Company B's voting common stock and
sells 1%. Company A's investment, results of operations (current
and prior periods presented), and retained earnings should be
adjusted retroactively.

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