Quiz Appendix E – T/F Cost-Based Recording of Equity Method Investments
Financial Accounting
Thomas, Tietz, and Harrison
12th Edition
Initial recording of equity method investments is done at cost.
Initial recording of equity method investments is done at cost.
The equity method applies the investor’s ownership percentage to record their portion of the investee’s net income, but not dividends.
The Equity-method Investment account increases when the investee reports net income under the equity method.
If the quoted bond price is 103, it indicates that the bonds were sold at a discount.
The income statement reports unrealized gains and losses on equity securities when the investor has insignificant influence.
For an investment to qualify as a current asset, it must be either liquid or intended for the payment of a current liability.
Ownership of voting stock ranging from 20% to 50% by an investor implies significant influence over the investee.
Dividends received in cash from stock investments with less than 20% ownership of the investee should be credited to the Equity-Method Investment account.
A year-end elimination entry is necessary in consolidation accounting to combine the subsidiary company’s stockholders’ equity accounts with those of the parent company.
What is the term used for debt investments that are expected to be sold in the near term with the intention of generating profits on the sale?