Solutions for Fundamentals of Advanced Accounting, 9th Edition by Hoyle

,ACCESSs3Tests3Banks3fors3Fundamentalss3ofs3Advanceds3Accountings39ths3Edition
s3Hoyle
Chapters301s3-s3Thes3Equitys3Methods3ofs3Accountings3fors3Investmentss3–
s3Hoyle,s3Schaefer,s3Doupnik,s3Fundamentalss3ofs3Advanceds3Accounting,s39/e



CHAPTERs31
THEs3EQUITYs3METHODs3OFs3ACCOUNTINGs3FORs3INVESTME
s3


NTS

Chapters3Outline

I. Fours3methodss3ares3principallys3useds3tos3accounts3fors3ans3investments3ins3equitys3se
curitiess3alongs3withs3as3fairs3values3option.

A. Fairs3values3method:s3applieds3bys3ans3investors3whens3onlys3as3smalls3per
centages3ofs3as3company’ss3votings3stocks3iss3held.

1. Thes3investors3recognizess3incomes3whens3thes3investees3declaress3as3dividend.

2. Portfolioss3ares3reporteds3ats3fairs3value.s3Ifs3fairs3valuess3ares3unavailable,s3in
vestments3iss3reporteds3ats3cost.

B. Costs3Method:s3applieds3tos3investmentss3withouts3as3readilys3determinables3fairs3va
lue.s3Whens3thes3fairs3values3ofs3ans3investments3ins3equitys3securitiess3iss3nots3read
ilys3determinable,s3ands3thes3investments3providess3neithers3significants3influences3n
ors3control,s3thes3investments3mays3bes3measureds3ats3cost.s3Thes3investments3rem
ainss3ats3costs3unless

1. As3demonstrables3impairments3occurss3fors3thes3investment,s3or

2. Ans3observables3prices3changes3occurss3fors3identicals3ors3similars3investmentss3o
fs3thes3sames3issuer.
Thes3investors3typicallys3recognizess3itss3shares3ofs3investees3dividendss3declareds3as
s3dividends3income.


C. Consolidation:s3whens3ones3firms3controlss3anothers3(e.g.,s3whens3as3parents3hass
3as3majoritys3interests3ins3thes3votings3stocks3ofs3as3subsidiarys3ors3controls3throug
hs3variables3interests,s3theirs3financials3statementss3ares3consolidateds3ands3repor
teds3fors3thes3combineds3entity.

D. Equitys3method:s3applieds3whens3thes3investors3hass3thes3abilitys3tos3exercise
s3significants3influences3overs3operatings3ands3financials3policiess3ofs3thes3inv
estee.

1. Abilitys3tos3significantlys3influences3investees3iss3indicateds3bys3severals3factors
s3includings3representations3ons3thes3boards3ofs3directors,s3participations3ins3p
olicy-making,s3etc.

2. GAAPs3guideliness3presumes3thes3equitys3methods3iss3applicables3ifs320s3tos350s3p
ercents3ofs3thes3outstandings3votings3stocks3ofs3thes3investees3iss3helds3bys3thes3i
nvestor.

Currents3financials3reportings3standardss3allows3firmss3tos3elects3tos3uses3fairs3values3fors

1-1
©s3McGraws3Hills3LLC.s3Alls3rightss3reserved.s3Nos3reproductions3ors3distributions3withouts3thes3priors3writtens3con
sents3ofs3McGraws3Hills3LLC.
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, 3anys3news3investments3ins3equitys3sharess3includings3thoses3wheres3thes3equitys3method
s3woulds3otherwises3apply.s3However,s3thes3option,s3onces3taken,s3iss3irrevocable.s3Thes3
investors3recognizess3boths3investees3dividendss3ands3changess3ins3fairs3values3overs3ti
mes3ass3income.




1-2
©s3McGraws3Hills3LLC.s3Alls3rightss3reserved.s3Nos3reproductions3ors3distributions3withouts3thes3priors3writtens3con
sents3ofs3McGraws3Hills3LLC.
mynursytest.store

, ACCESSs3Tests3Banks3fors3Fundamentalss3ofs3Advanceds3Accountings39ths3Edition
s3Hoyle
Chapters301s3-s3Thes3Equitys3Methods3ofs3Accountings3fors3Investmentss3–
s3Hoyle,s3Schaefer,s3Doupnik,s3Fundamentalss3ofs3Advanceds3Accounting,s39e


II. Accountings3fors3ans3investment:s3thes3equitys3method

A. Thes3investors3adjustss3thes3investments3accounts3tos3reflects3alls3changess3ins3thes
3equitys3ofs3thes3investees3company.


B. Thes3investors3accruess3investees3incomes3whens3its3iss3reporteds3ins3thes3investe
e’ss3financials3statements.

C. Dividendss3declareds3bys3thes3investees3creates3as3reductions3ins3thes3carryings3am
ounts3ofs3thes3Investments3account.s3Thiss3books3assumess3alls3investees3dividends
s3ares3declareds3ands3paids3ins3thes3sames3reportings3period.


III. Specials3accountings3proceduress3useds3ins3thes3applications3ofs3thes3equitys3method
A. Reportings3as3changes3tos3thes3equitys3methods3whens3thes3abilitys3tos3significantlys
3influences3ans3investees3iss3achieveds3throughs3as3seriess3ofs3acquisitions.
1. Initials3purchase(s)s3wills3bes3accounteds3fors3bys3meanss3ofs3thes3fairs3values3
methods3(ors3ats3cost)s3untils3thes3abilitys3tos3significantlys3influences3iss3attain
ed.
2. Whens3thes3abilitys3tos3exercises3significants3influences3occurss3followings3as3seri
ess3ofs3stocks3purchases,s3thes3investors3appliess3thes3equitys3methods3prospect
ively.s3Thes3totals3fairs3values3ats3thes3dates3significants3influences3iss3attaineds3i
ss3compareds3tos3thes3investee’ss3books3values3tos3determines3futures3excesss3f
airs3values3amortizations.
B. Investees3incomes3froms3others3thans3continuings3operations
1. Thes3investors3recognizess3itss3shares3ofs3investees3reporteds3others3comp
rehensives3incomes3(OCI)s3throughs3thes3investments3accounts3ands3thes3i
nvestor’ss3owns3OCI.
2. Incomes3itemss3suchs3ass3discontinueds3operationss3thats3ares3reporteds3separat
elys3bys3thes3investees3shoulds3bes3showns3ins3thes3sames3manners3bys3thes3inv
estor.s3Thes3materialitys3ofs3theses3others3investees3incomes3elementss3(ass3its3a
ffectss3thes3investor)s3continuess3tos3bes3as3criterions3fors3separates3disclosure.
C. Investees3losses
1. Lossess3reporteds3bys3thes3investees3creates3correspondings3lossess3fors3thes3investor.
2. As3permanents3declines3ins3thes3fairs3values3ofs3ans3investee’ss3stocks3shoulds3b
es3recognizeds3immediatelys3bys3thes3investors3ass3ans3impairments3loss.
3. Investees3lossess3cans3possiblys3reduces3thes3carryings3values3ofs3thes3investme
nts3accounts3tos3as3zeros3balance.s3Ats3thats3point,s3thes3equitys3methods3ceasess
3tos3bes3applicables3ands3thes3fair-values3methods3iss3subsequentlys3used.
D. Reportings3thes3sales3ofs3ans3equitys3investment
1. Thes3investors3appliess3thes3equitys3methods3untils3thes3disposals3dates3tos3establi
shs3as3propers3books3value.
2. Followings3thes3sale,s3thes3equitys3methods3continuess3tos3bes3appropriates3ifs3en
oughs3sharess3ares3stills3helds3tos3maintains3thes3investor’ss3abilitys3tos3significant
lys3influences3thes3investee.s3Ifs3thats3abilitys3hass3beens3lost,s3thes3fair-
values3methods3iss3subsequentlys3used.

IV. Excesss3investments3costs3overs3books3values3acquired
A. Thes3prices3ans3investors3payss3fors3equitys3securitiess3oftens3differss3significant
lys3froms3thes3investee’ss3underlyings3books3values3primarilys3becauses3thes3hi
storicals3costs3baseds3accountings3models3doess3nots3keeps3tracks3ofs3changes
s3ins3as3firm’ss3fairs3value.
B. Paymentss3mades3ins3excesss3ofs3underlyings3books3values3cans3sometimess3bes3id
1-3
©s3McGraws3Hills3LLC.s3Alls3rightss3reserved.s3Nos3reproductions3ors3distributions3withouts3thes3priors3writtens3con
sents3ofs3McGraws3Hills3LLC.
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