Describe each of these methods for recording investment, and indicate their advantages and disadvantages.

Question

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Answer 1

Question

Chapter 3, Problem 1Q

To determine

Describe each of these methods for recording investment, and indicate their advantages and disadvantages.

Expert Solution & Answer

Answer to Problem 1Q

The methods for recording investment are as follows:

Equity method
Initial value method
Partial equity method

Explanation of Solution

Equity method:

The equity method is used when the investor is having the significant influence and the investment balance is reduced by the amount of dividend paid. The method is however best method for accounting of consolidated investments but it is the difficult method to use.

Initial value method:

The dividends are recorded as income under the initial value method. The initial value method differs from the equity method as the dividend is not reduced from the value of the investment.

Partial equity method:

The partial equity method is not that appropriate as the equity method and the fair value method amortizations are accounted under this method.

The partial equity method is however easier than the equity method.

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Financial accounting question

From the balance sheets 12/31/2024 Accounts receivable Prepaid insurance Machines Acc. depreciation 12/31/2023 From the income statement 12/31/2024 $90,000 8,000 $80,000 12,000 Sales $750,000 Cost of sales -600,000 65,000 95,000 Operating Expenses -75,000 -30,000 -20,000 Gain on sale of machine 4,000 Additional information: Operating expenses includes depreciation expense Machines costing $30,000 were sold for $22,000 at a gain.

Answer 2

Question

Chapter 3, Problem 1Q

To determine

Describe each of these methods for recording investment, and indicate their advantages and disadvantages.

Expert Solution & Answer

Answer to Problem 1Q

The methods for recording investment are as follows:

Equity method
Initial value method
Partial equity method

Explanation of Solution

Equity method:

The equity method is used when the investor is having the significant influence and the investment balance is reduced by the amount of dividend paid. The method is however best method for accounting of consolidated investments but it is the difficult method to use.

Initial value method:

The dividends are recorded as income under the initial value method. The initial value method differs from the equity method as the dividend is not reduced from the value of the investment.

Partial equity method:

The partial equity method is not that appropriate as the equity method and the fair value method amortizations are accounted under this method.

The partial equity method is however easier than the equity method.

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Answer 3

Question

Chapter 3, Problem 1Q

To determine

Describe each of these methods for recording investment, and indicate their advantages and disadvantages.

Expert Solution & Answer

Answer to Problem 1Q

The methods for recording investment are as follows:

Equity method
Initial value method
Partial equity method

Explanation of Solution

Equity method:

The equity method is used when the investor is having the significant influence and the investment balance is reduced by the amount of dividend paid. The method is however best method for accounting of consolidated investments but it is the difficult method to use.

Initial value method:

The dividends are recorded as income under the initial value method. The initial value method differs from the equity method as the dividend is not reduced from the value of the investment.

Partial equity method:

The partial equity method is not that appropriate as the equity method and the fair value method amortizations are accounted under this method.

The partial equity method is however easier than the equity method.

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Answer 4

Question

Chapter 3, Problem 1Q

To determine

Describe each of these methods for recording investment, and indicate their advantages and disadvantages.

Expert Solution & Answer

Answer to Problem 1Q

The methods for recording investment are as follows:

Equity method
Initial value method
Partial equity method

Explanation of Solution

Equity method:

The equity method is used when the investor is having the significant influence and the investment balance is reduced by the amount of dividend paid. The method is however best method for accounting of consolidated investments but it is the difficult method to use.

Initial value method:

The dividends are recorded as income under the initial value method. The initial value method differs from the equity method as the dividend is not reduced from the value of the investment.

Partial equity method:

The partial equity method is not that appropriate as the equity method and the fair value method amortizations are accounted under this method.

The partial equity method is however easier than the equity method.

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Answer 5

Chapter 3, Problem 1Q

To determine

Describe each of these methods for recording investment, and indicate their advantages and disadvantages.

Expert Solution & Answer

Answer to Problem 1Q

The methods for recording investment are as follows:

Equity method
Initial value method
Partial equity method

Explanation of Solution

Equity method:

The equity method is used when the investor is having the significant influence and the investment balance is reduced by the amount of dividend paid. The method is however best method for accounting of consolidated investments but it is the difficult method to use.

Initial value method:

The dividends are recorded as income under the initial value method. The initial value method differs from the equity method as the dividend is not reduced from the value of the investment.

Partial equity method:

The partial equity method is not that appropriate as the equity method and the fair value method amortizations are accounted under this method.

The partial equity method is however easier than the equity method.

Answer 6

Chapter 3, Problem 1Q

To determine

Describe each of these methods for recording investment, and indicate their advantages and disadvantages.

Expert Solution & Answer

Answer to Problem 1Q

The methods for recording investment are as follows:

Equity method
Initial value method
Partial equity method

Explanation of Solution

Equity method:

The equity method is used when the investor is having the significant influence and the investment balance is reduced by the amount of dividend paid. The method is however best method for accounting of consolidated investments but it is the difficult method to use.

Initial value method:

The dividends are recorded as income under the initial value method. The initial value method differs from the equity method as the dividend is not reduced from the value of the investment.

Partial equity method:

The partial equity method is not that appropriate as the equity method and the fair value method amortizations are accounted under this method.

The partial equity method is however easier than the equity method.

Answer 7

Chapter 3, Problem 1Q

To determine

Describe each of these methods for recording investment, and indicate their advantages and disadvantages.

Answer 8

Expert Solution & Answer

Answer to Problem 1Q

The methods for recording investment are as follows:

Equity method
Initial value method
Partial equity method

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

Explanation of Solution

Equity method:

The equity method is used when the investor is having the significant influence and the investment balance is reduced by the amount of dividend paid. The method is however best method for accounting of consolidated investments but it is the difficult method to use.

Initial value method:

The dividends are recorded as income under the initial value method. The initial value method differs from the equity method as the dividend is not reduced from the value of the investment.

Partial equity method:

The partial equity method is not that appropriate as the equity method and the fair value method amortizations are accounted under this method.

The partial equity method is however easier than the equity method.

Answer 12

Ch. 3 - Prob. 1Q Ch. 3 - Prob. 2Q Ch. 3 - Prob. 3Q Ch. 3 - Prob. 4Q Ch. 3 - When a parent company applies the initial value...Ch. 3 - Several years ago, Jenkins Company acquired a...Ch. 3 - Benns adopts the equity method for its 100 percent...Ch. 3 - Prob. 8Q Ch. 3 - Prob. 9Q Ch. 3 - Prob. 10Q

Describe each of these methods for recording investment, and indicate their advantages and disadvantages.

Describe each of these methods for recording investment, and indicate their advantages and disadvantages.

Answer to Problem 1Q

Explanation of Solution

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Chapter 3 Solutions