Advanced Accounting Chapter 4 exam 100% solved

Advanced Accounting Chapter 4 exam 100% solved Accounting for the Investment by the Parent - stock acquisition - answerDuring the consolidation process, the "investment" account is eliminated against the equity of the subsidiary However, the parent company must account for the "investment" in its own accounting system If the parent company presents parent-only financial statements for any purpose... - answerthe complete equity method should be used on those statements for investees over which the parent has either significant influence or effective control 3 Choices* for Accounting for Investment by the Parent - answer1. Cost Method (simplest) 2. Partial Equity Method 3. Complete Equity Method Reasons in which you need to use complete equity method - answer1. If the parent company presents parent-only financial statements for any purpose, then the complete equity method must be used to account for the investment. 2. Only the complete equity method is acceptable for those investments where significant influence but not control is present First JE for all three methods - answerThe investment in subsidiary is initially recorded at its cost Liquidating Dividend - answerFrom the point of view of a parent company, a purchased subsidiary is deemed to have distributed a liquidating dividend when the