QUESTION 49Which of the following observations is NOT consistent with the accounting for investments in equity securities where there is no significant influence? The investor recognizes income from the investment as dividends are declared by the investee. Changes in the number of investment shares resulting from stock dividends, stock splits, or reverse splits must be formally recorded by the investor. Investments are carried by the investor at fair value. When the securities are remeasured to fair value as of the end of each period, any resulting difference is an unrealized gain or loss to be recognized in income.

Solution: Following observations are consistent with the accounting for investments in equity securities where there is no significant influence: 1. The investor recognizes income from the investment as dividends are declared by the investee. 2. Investments are carried by the investor at fair value. 3. When the securities are remeasured to fair value as of the end of each period, any resulting difference is an unrealized gain or loss to be recognized in income.Observation that is NOT consistent with the accounting for investments in equity securities where there is no significant influence is " Changes in the number of investment shares resulting from stock dividends, stock splits, or reverse splits must be formally recorded by the investor" as changes in nos of shares resulting from stock dividends, stock splits etc were not recorded by investor as these do not carry any cost and only changes in nos of shares. Hence 2nd option is correct.

Answered: Which of the following observations is…

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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QUESTION 49

Which of the following observations is NOT consistent with the accounting for investments in equity securities where there is no significant influence?

		The investor recognizes income from the investment as dividends are declared by the investee.
		Changes in the number of investment shares resulting from stock dividends, stock splits, or reverse splits must be formally recorded by the investor.
		Investments are carried by the investor at fair value.
		When the securities are remeasured to fair value as of the end of each period, any resulting difference is an unrealized gain or loss to be recognized in income.

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