Which of the following results in a decrease in the investment account whenapplying the equity method?Purchase of additional common stock by the investor during the current year.Dividends paid by the investor.Share of gross profit on intra-entity inventory sales for the current year.Net income of the investee.Net income of the investor.

The equity method is generally applied in case of investment in associate/ joint venture

Answered: Which of the following results in a…

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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Why does the equity method record dividends from an investee as a reduction in the investment account, not as dividend income?
Which one of the following equations represents retained earnings activity at the end of the year? a. Beginning Balance + Net Income + Dividends b. Beginning Balance + Cash Inflows - Dividends c. Beginning Balance + Dividends - Net Income d. Beginning Balance - Dividends + Net Income
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
When using the equity method of accounting, when is revenue recorded on the books of the investor company?a. When the fair value of the affiliate stock increases.b. When a dividend is received from the affiliate.c. When the affiliate company reports net income.d. Both b and c above.
The distribution of a dividend that represents a partial return of the original investment made by the shareholders is known as a. participating dividend. b. liquidating dividend. c. property dividend.
6. Unrealized gains and losses on investments in trading securities are reported a. as a current assetb. on the income statementc. on the balance sheet as part of stockholders' equityd. as a contra asset
When recording dividends received from a stock investment accounted for using the equity method, which of thefollowing statements is true?a. Total assets are increased and net income is increased.b. Total assets are increased and total stockholders’ equityis increased.c. Total assets are decreased and total stockholders’equity is decreased.d. Total assets and total stockholders’ equity do notchange

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