Advanced Financial Accounting
11th Edition
ISBN: 9780078025877
Author: Theodore E. Christensen, David M Cottrell, Cassy JH Budd Advanced Financial Accounting
Publisher: McGraw-Hill Education
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Textbook Question
Chapter 2, Problem 2.2.1E
Multiple-Choice Questions on Intercorporate Investments
Select the correct answer for each of the following questions.
1. Companies often acquire ownership in other companies using a variety of ownership arrangement. The investor should use equity-method reporting whenever
a. The investor purchases voting common stock of the investee.
h. The investor has significant influence over the operating and financing decisions of the investee.
c. The investor purchases goods and services from the investee.
d. There is no differential included in investment, the carrying value of the investment is less than the market value of the investee’s shares held by the investor.
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Students have asked these similar questions
3. Under the equity method, which of the following decreases
the carrying amount of an investment in associate or joint
venture?
a. share in the profit of the investee
b. share in the other comprehensive income of the investee
C. share in the dividends declared by the investee
d. a decline in the fair value of the investment
2. PAS 28 requires the use of the equity method. Under this
method, an investment in associate or joint venture is initially
at
2.
PAS 28 requires the use of the equity method. Under
a.
method, an investment in associate or joint venture is initially
b.
and subsequently measured at
Initial measurement
2. En
in
Subsequent measurement
initial cost, adjusted for the investor's
share in the investee's changes in
a.
fair value
pe
equity
cost, adjusted for the investor's share
in the investee's changes in equity
b.
cost
C.
fair value plus
fair value
transaction costs
d.
fair value plus
initial cost, adjusted for the investor's
share in the investee's changes in
transaction costs
equity
3.
Which of the following statement is correct
اخترأحد الخيارات
a. Capital structure is a method of analyzing and comparing substantial future investments and expenditures to determine which
ones are most worthwhile
b. Working capital refers to the mix of different sources of long-term funds
C. None of the statement is correct
d. Capital structure of a company may comprise of Equity Share Capital, Preference Share Capital and Debentures
e. Capital expenditure decisions do not involve commitment of large sums of money
أخل اختباري
Chapter 2 Solutions
Advanced Financial Accounting
Ch. 2 - What types of investments in common stock normally...Ch. 2 - Prob. 2.2AQCh. 2 - When is equity method reporting considered...Ch. 2 - Prob. 2.4QCh. 2 - Prob. 2.5QCh. 2 - Prob. 2.6QCh. 2 - Prob. 2.7QCh. 2 - Prob. 2.8QCh. 2 - How does carrying securities at fair value...Ch. 2 - How does the fully adjusted equity method differ...
Ch. 2 - Prob. 2.11QCh. 2 - What is the modified equity method? When might a...Ch. 2 - Prob. 2.13AQCh. 2 - Prob. 2.14QCh. 2 - Prob. 2.15QCh. 2 - Prob. 2.16QCh. 2 - Prob. 2.17QCh. 2 - How are a subsidiary’s dividend declarations...Ch. 2 - Prob. 2.19QCh. 2 - Give a definition of consolidated retained...Ch. 2 - Prob. 2.21QCh. 2 - Prob. 2.22QCh. 2 - Choice of Accounting Method Slanted Building...Ch. 2 - Prob. 2.2CCh. 2 - Prob. 2.3ACCh. 2 - Prob. 2.4CCh. 2 - Prob. 2.5CCh. 2 - Prob. 2.6CCh. 2 - Prob. 2.1.1ECh. 2 - Multiple-Choice Questions on Accounting for Equity...Ch. 2 - Prob. 2.1.3ECh. 2 - Prob. 2.1.4ECh. 2 - Prob. 2.1.5ECh. 2 - Prob. 2.1.6ECh. 2 - Multiple-Choice Questions on Intercorporate...Ch. 2 - Prob. 2.2.2ECh. 2 - Prob. 2.3.1ECh. 2 - Prob. 2.3.2ECh. 2 - Prob. 2.3.3ECh. 2 - Prob. 2.3.4ECh. 2 - Cost versus Equity Reporting Winston Corporation...Ch. 2 - Prob. 2.5ECh. 2 - Prob. 2.6ECh. 2 - Prob. 2.7ECh. 2 - Income Reporting Grandview Company purchased 40...Ch. 2 - Prob. 2.9ECh. 2 - Carrying an Investment at Fair Value versus Equity...Ch. 2 - Investee with Preferred Stock Outstanding Reden...Ch. 2 - Prob. 2.12AECh. 2 - Prob. 2.13AECh. 2 - Prob. 2.14ECh. 2 - Prob. 2.15ECh. 2 - Prob. 2.16ECh. 2 - Prob. 2.17ECh. 2 - Changes ¡n the Number of Shares Held Idle...Ch. 2 - Prob. 2.19PCh. 2 - Carried at Fair Value Journal Entries Marlow...Ch. 2 - Prob. 2.21APCh. 2 - Equity-Method Income Statement Wealthy...Ch. 2 - Consolidated Worksheet at End of the First Year of...Ch. 2 - Consolidated Worksheet at End of the Second Year...Ch. 2 - Prob. 2.25PCh. 2 - Prob. 2.26PCh. 2 - Prob. 2.27BPCh. 2 - Prob. 2.28BP
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- Equity accounting for intercorporate investment relies on book value. But if the ownership is an investment, how does fair value accounting enter in? Should it be considered at all?arrow_forwardWhich of the following is INCORRECT description for private equity transactions? Group of answer choices a. There are liquid public markets for privately held securities such as NASDAQ. b. The process of creating value in private equity, whether building a brand-new company or turning around an established one requires significant time and means a long-term relationship. c. The general partner participates actively in the governance of the investment d. Private equity investing is a lot of work as gaining access to better opportunities requires active sourcing and negotiationarrow_forwardWhy is the Equity Valuation method is preferable from the point of view of an investor in valuing the business?arrow_forward
- State whether the following statements are true or false and justify your answer in each case: a) The investor's relative exposure to the risks and rewards of the investee is known as the investor's 'extent of equity ownership' in the investee. b) The investor's 'extent of equity ownership' in the investee determines whether the investee is equity accounted. consolidated or simply measured as an investment in the investor's consolidated financial statements. c) The investor's degree of influence over an investee increases as the investment changes from a simple investment to a subsidiary. finally reaching the strongest degree of influence when the subsidiary becomes an associate. d) An investment over which the investor has significant influence is called an associate. e) An investee that is jointly controlled by the investor is called a subsidiary. f) The only instance where the investor may equity account for its investee is when such an investee is classified as an associate. g)…arrow_forwardWhich of the following statement is true? a. In brokered markets, buyers and sellers confront each other directly and bargain over price. b. Primary market is the market for trading outstanding securities. c. Preference shareholders have a higher priority claim on company’s assets than ordinary shareholders in the event of insolvency. d. Ordinary shareholders receive fixed dividend payments.arrow_forwardA friend who knows you study accounting approaches you to discuss share market investment strategies. They believe deciding which shares to invest in should be based solely on understanding the business model and reading analyst forecasts regarding the company. Is this strategy sound? Why or why not? What other approaches or tools would you recommend to assist in making investment decisions? Discuss.arrow_forward
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