Advanced Accounting test 1 with verified solutions

Advanced Accounting test 1 with verified solutions When an investor uses the equity method to account for investments in common stock, the investor's share of cash dividends from the invested should be recorded as - answerA deduction from the investment account. Which of the following does not indicate an investor company's ability to significantly influence an investee? - answerThe investor owns 30 percent of the invested but another owner holds the remaining 70 percent. Sisk Company has owned 10 percent of Maust Inc., for the past several years. This ownership did not allow Sisk to have significant influence over Maust. Recently Sisk acquired an additional 30 percent of Maust and now will use the equity method. How will the investor report change? - answerA retrospective adjustment is made to restate all prior years presented using the equity method Under fair-value accounting for an equity investment, which of the following affects the income the investor recognizes from its ownership of the investee? - answerChanges in the fair-value of the investor's ownership in shares of the investee When an equity method investment account is reduced to a zero balance - answerThe investment retains a zero balance until subsequent investee profits eliminate all unrecognized losses