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.

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

ChapterA2: Investments

Section: Chapter Questions

Problem 12MCQ: When the market value of a companys available-for-sale securities is lower than its cost, the...

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Which of the following is false? A. Under PFRS 9, the basis of carrying investments in debt securities as FVPL, FVOCI, or at amortized cost, is the entity’s business model. B. Under PFRS 9, an investment in equity securities not held for trading is automatically accounted for as FVOCI. C. Reclassification of investment in equity securities under PFRS 9 is not allowed. D. Under PFRS 9, reclassification of investment in debt securities is allowed. Or none of the choices?
For fi nancial assets classifi ed as trading securities, how are unrealized gains and lossesrefl ected in shareholders’ equity?A . Th ey are not recognized.
37. When an entity reduces its interest in an investment in equity securities accounted for by the equity method and changes in to the fair value method. What is the initial measurement of the investment for purposes of subsequent changes in market value? a. Carrying amount at the date of changea. Original costb. Market value at the date of changec. Market value at the date of acquisition
Investments in equity securities for which the investor has insignificant influence over the investee are classified for reporting purposes under the fair value method in one of two categories. What are these two categories?
All of the following statements are true regarding available-for-sale securities except a.changes in their fair values are not recognized on the income statement. b.they are recorded at fair value. c.a valuation allowance account is not used with available-for-sale securities. d.changes in their fair values are included as part of stockholders' equity.
Investments in equity securities for which the investor has insignificant influence over the investee are classified for reporting purposes under the fair value method. What is fair value?
What accounting treatments are appropriate for investments in equity securities without readily determinable fair values?
Why are unrealized gains and losses on available-for-sale securities not reported in theincome statement, but instead are reported in other comprehensive income, and thenshown in accumulated other comprehensive income (AOCI) in the balance sheet?
Which of the following shall be taken to profit or loss for investments measured at fair value through other comprehensive income? change in fair value during the reporting period gain or loss on disposal of the securities dividends received declared from current year's earnings of the investee impairment in the value of the securities
No explanation is required. Direct answer shall be appreciated :)
When the market value of a companys available-for-sale securities is lower than its cost, the difference should be: a. shown as a liability. b. shown as a valuation allowance added to the historical cost of the investments. c. shown as a valuation allowance subtracted from the historical cost of the investments. d. No entry is made, the securities are shown at historical cost.
Which of the following is correct regarding the classification of investment in debt instruments as financial asset at fair value through OCI? a. This classification is not allowed for investment in debt instruments. b. An entity may make an irrevocable election to classify investment in a debt instrument that is not ‘held for trading’ as such. c. In order to be classified as such, a debt instrument needs to both have simple principal and interest cash flows and be held in a business model in which both holding and selling financial assets are integral to meeting management’s objectives. d. All of the above.