Equity method: The equity method basically keeps the record of the parent’s ownership interest that is multiplied by the reported net income of the subsidiary. This income will be added to parent’s investment account and the deduction in this method will be of the parent’s ownership interest multiplied by the reported losses of the subsidiary and parent’s ownership interest multiplied by the declared dividends of the subsidiary. All together equals the equity-adjusted balance. Cost method: The cost method basically retains the original cost of acquisition balance in the subsidiary account. As the income is earned by the subsidiary, no adjustments would be made. To record : The acquisition of L Company in the books of R Company.

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Answer 1

Question

Chapter 3, Problem 3B.1.1AE

To determine

Equity method:

The equity method basically keeps the record of the parent’s ownership interest that is multiplied by the reported net income of the subsidiary. This income will be added to parent’s investment account and the deduction in this method will be of the parent’s ownership interest multiplied by the reported losses of the subsidiary and parent’s ownership interest multiplied by the declared dividends of the subsidiary. All together equals the equity-adjusted balance.

Cost method:

The cost method basically retains the original cost of acquisition balance in the subsidiary account. As the income is earned by the subsidiary, no adjustments would be made.

To record: The acquisition of L Company in the books of R Company.

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Answer 2

Question

Chapter 3, Problem 3B.1.1AE

To determine

Equity method:

The equity method basically keeps the record of the parent’s ownership interest that is multiplied by the reported net income of the subsidiary. This income will be added to parent’s investment account and the deduction in this method will be of the parent’s ownership interest multiplied by the reported losses of the subsidiary and parent’s ownership interest multiplied by the declared dividends of the subsidiary. All together equals the equity-adjusted balance.

Cost method:

The cost method basically retains the original cost of acquisition balance in the subsidiary account. As the income is earned by the subsidiary, no adjustments would be made.

To record: The acquisition of L Company in the books of R Company.

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Answer 3

Question

Chapter 3, Problem 3B.1.1AE

To determine

Equity method:

The equity method basically keeps the record of the parent’s ownership interest that is multiplied by the reported net income of the subsidiary. This income will be added to parent’s investment account and the deduction in this method will be of the parent’s ownership interest multiplied by the reported losses of the subsidiary and parent’s ownership interest multiplied by the declared dividends of the subsidiary. All together equals the equity-adjusted balance.

Cost method:

The cost method basically retains the original cost of acquisition balance in the subsidiary account. As the income is earned by the subsidiary, no adjustments would be made.

To record: The acquisition of L Company in the books of R Company.

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Answer 4

Question

Chapter 3, Problem 3B.1.1AE

To determine

Equity method:

The equity method basically keeps the record of the parent’s ownership interest that is multiplied by the reported net income of the subsidiary. This income will be added to parent’s investment account and the deduction in this method will be of the parent’s ownership interest multiplied by the reported losses of the subsidiary and parent’s ownership interest multiplied by the declared dividends of the subsidiary. All together equals the equity-adjusted balance.

Cost method:

The cost method basically retains the original cost of acquisition balance in the subsidiary account. As the income is earned by the subsidiary, no adjustments would be made.

To record: The acquisition of L Company in the books of R Company.

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Answer 5

Chapter 3, Problem 3B.1.1AE

To determine

Equity method:

The equity method basically keeps the record of the parent’s ownership interest that is multiplied by the reported net income of the subsidiary. This income will be added to parent’s investment account and the deduction in this method will be of the parent’s ownership interest multiplied by the reported losses of the subsidiary and parent’s ownership interest multiplied by the declared dividends of the subsidiary. All together equals the equity-adjusted balance.

Cost method:

The cost method basically retains the original cost of acquisition balance in the subsidiary account. As the income is earned by the subsidiary, no adjustments would be made.

To record: The acquisition of L Company in the books of R Company.

Answer 6

Chapter 3, Problem 3B.1.1AE

To determine

Equity method:

The equity method basically keeps the record of the parent’s ownership interest that is multiplied by the reported net income of the subsidiary. This income will be added to parent’s investment account and the deduction in this method will be of the parent’s ownership interest multiplied by the reported losses of the subsidiary and parent’s ownership interest multiplied by the declared dividends of the subsidiary. All together equals the equity-adjusted balance.

Cost method:

The cost method basically retains the original cost of acquisition balance in the subsidiary account. As the income is earned by the subsidiary, no adjustments would be made.

To record: The acquisition of L Company in the books of R Company.

Answer 7

Chapter 3, Problem 3B.1.1AE

To determine

Equity method:

The equity method basically keeps the record of the parent’s ownership interest that is multiplied by the reported net income of the subsidiary. This income will be added to parent’s investment account and the deduction in this method will be of the parent’s ownership interest multiplied by the reported losses of the subsidiary and parent’s ownership interest multiplied by the declared dividends of the subsidiary. All together equals the equity-adjusted balance.

Cost method:

The cost method basically retains the original cost of acquisition balance in the subsidiary account. As the income is earned by the subsidiary, no adjustments would be made.

To record: The acquisition of L Company in the books of R Company.

Answer 8

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Answer 9

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Answer 10

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Answer 11

Ch. 3 - Prob. 1UTI Ch. 3 - Prob. 2UTI Ch. 3 - Prob. 3UTI Ch. 3 - Prob. 4UTI Ch. 3 - Prob. 5UTI Ch. 3 - Prob. 6UTI Ch. 3 - Prob. 7UTI Ch. 3 - Prob. 1E Ch. 3 - Prob. 2E Ch. 3 - Prob. 3.1E

Solution Summary: The author explains the equity method, which keeps the parent's ownership interest multiplied by the reported net income of the subsidiary.

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Chapter 3 Solutions