SOLUTIONS MANUAL for Advanced Accounting, 15th Edition by Joe Ben Hoyle, Schaefer and Doupnik ||Chapter 1-19 ||ISBN NO :9781264798483 ||Complete Guide A+.

SOLUTIONS MANUALcz cz




for Advanced Accounting, 15th Edition by Joe Ben Hoyle, Schaefer
cz cz cz cz cz cz cz cz cz




and Doupnik ||Chapter 1-19 ||ISBN NO :9781264798483 ||Complete
cz cz cz cz cz cz cz cz




cz Guide A+.
cz




Geniusexpert




Geniusexpert

,https://www.stuvia.com/user/GeniusExpert



Solution Manual For All Chapters
cz cz cz cz




SOLUTION MANUAL FOR cz cz




ADVANCED ACCOUNTING 15TH EDITION BY JOE BEN HOYLE, THOMAS
cz cz cz cz cz cz cz cz


SCHAEFER AND TIMOTHY DOUPNIK
cz cz cz cz




CHAPTER 1-19 cz




CHAPTER 1 cz




cz THE EQUITY METHOD OF ACCOUNTING FOR INVESTMENTS
cz cz cz cz cz cz




Chapter Outline cz




I. Four methods are principally used to account for an investment in equity
cz cz cz cz cz cz cz cz cz cz cz




securities along with a fair value option.
cz cz cz cz cz cz cz




A. Fair value method: applied by an investor when only a small
cz cz cz cz cz cz cz cz cz cz




percentage of a company‘s voting stock is held.
cz cz cz cz cz cz cz cz




1. The investor recognizes income when the investee declares a dividend.
cz cz cz cz cz cz cz cz cz




2. Portfolios are reported at fair value. If fair values are unavailable,
cz cz cz cz cz cz cz cz cz cz




cz investment is reported at cost. cz cz cz cz




B. Cost Method: applied to investments without a readily determinable fair value.
cz cz cz cz cz cz cz cz cz cz




cz When the fair value of an investment in equity securities is not readily
cz cz cz cz cz cz cz cz cz cz cz cz




determinable, and the investment provides neither significant influence nor
cz cz cz cz cz cz cz cz cz



cz control, the investment may be measured at cost. The investment remains at
cz cz cz cz cz cz cz cz cz cz cz




cz cost unless cz




1. A demonstrable impairment occurs for the investment, or
cz cz cz cz cz cz cz




2. An observable price change occurs for identical or similar investments of the
cz cz cz cz cz cz cz cz cz cz cz



cz same issuer. cz




The investor typically recognizes its share of investee dividends declared as
cz cz cz cz cz cz cz cz cz cz




dividend income.
cz cz




2-1

,C. Consolidation: when one firm controls another (e.g., when a parent has a
cz cz cz cz cz cz cz cz cz cz cz




cz majority interest in the voting stock of a subsidiary or control through
cz cz cz cz cz cz cz cz cz cz cz




variable interests, their financial statements are consolidated and reported
cz cz cz cz cz cz cz cz cz




cz for the combined entity.
cz cz cz




D. Equity method: applied when the investor has the ability to exercise
cz cz cz cz cz cz cz cz cz cz



significant influence over operating and financial policies of the
cz cz cz cz cz cz cz cz cz




cz investee.

1. Ability to significantly influence investee is indicated by several factors
cz cz cz cz cz cz cz cz cz




czincluding representation on the board of directors, participation in policy-
cz cz cz cz cz cz cz cz cz



making, etc. cz




2. GAAP guidelines presume the equity method is applicable if 20 to 50 percent of the
cz cz cz cz cz cz cz cz cz cz cz cz cz cz




2-1

, outstanding voting stock of the investee is held by the investor.
cz cz cz cz cz cz cz cz cz cz




Current financial reporting standards allow firms to elect to use fair value for any
cz cz cz cz cz cz cz cz cz cz cz cz cz




cz new investment in equity shares including those where the equity method would
cz cz cz cz cz cz cz cz cz cz cz




otherwise apply. However, the option, once taken, is irrevocable. The investor
cz cz cz cz cz cz cz cz cz cz cz



cz recognizes both investee dividends and changes in fair value over time as income.
cz cz cz cz cz cz cz cz cz cz cz cz




II. Accounting for an investment: the equity method
cz cz cz cz cz cz




A. The investor adjusts the investment account to reflect all changes in the equity
cz cz cz cz cz cz cz cz cz cz cz cz




of the investee company.
cz cz cz cz




B. The investor accrues investee income when it is reported in the investee‘s
cz cz cz cz cz cz cz cz cz cz cz




financial statements.
cz cz




C. Dividends declared by the investee create a reduction in the carrying amount
cz cz cz cz cz cz cz cz cz cz cz




cz of the Investment account. This book assumes all investee dividends are
cz cz cz cz cz cz cz cz cz cz




declared and paid in the same reporting period.
cz cz cz cz cz cz cz cz




III. Special accounting procedures used in the application of the equity method
cz cz cz cz cz cz cz cz cz cz




A. Reporting a change to the equity method when the ability to significantly
cz cz cz cz cz cz cz cz cz cz cz




influence an investee is achieved through a series of acquisitions.
cz cz cz cz cz cz cz cz cz cz




1. Initial purchase(s) will be accounted for by means of the fair value
cz cz cz cz cz cz cz cz cz cz cz



cz method (or at cost) until the ability to significantly influence is attained.
cz cz cz cz cz cz cz cz cz cz cz




2. When the ability to exercise significant influence occurs following a series of
cz cz cz cz cz cz cz cz cz cz cz




cz stock purchases, the investor applies the equity method prospectively. The
cz cz cz cz cz cz cz cz cz




cz total fair value at the date significant influence is attained is compared to
cz cz cz cz cz cz cz cz cz cz cz cz



cz the investee‘s book value to determine future excess fair value
cz cz cz cz cz cz cz cz cz



cz amortizations.
B. Investee income from other than continuing operations
cz cz cz cz cz cz




1. The investor recognizes its share of investee reported other
cz cz cz cz cz cz cz cz




cz comprehensive income (OCI) through the investment account and the cz cz cz cz cz cz cz cz



cz investor‘s own OCI. cz cz




2. Income items such as discontinued operations that are reported separately
cz cz cz cz cz cz cz cz cz




https://www.stuvia.com/user/GeniusExpert