F4 - M2 - Equity Method

Question 1

The _____method is used to account for investments if significant influence can be exercised by the investor over the investee

Answer 1

equity method

Question 2

Ownership of _______ percent of the voting stock of another investee company is presumed significant influence (with exceptions).

Answer 2

20 to 50

Question 3

For equity method account, record the investment at __________

Answer 3

Cost

Question 4

JE - What is the JE to record a initial purchase for an equity method investment

Answer 4

DR Investment in XXXX. CR Cash

Question 5

Generally, _______ received from the investee reduce the investment account

Answer 5

dividends

Question 6

JE - What is the JE to record a dividends received by equity method investment

Answer 6

DR Cash. CR Investment In XXX

Question 7

The investor “picks up” its share of investee’s earnings by increasing the ________ and recognizing the earnings on its ____________

Answer 7

investment account; income statement

Question 8

JE - What is the JE to record a percentage of income received by equity method investment

Answer 8

DR Investment in XXXX CR Equity Earnings/ Investee Income in XXX

Question 9

In Equity Method of Accounting, Differences between the _________ and the ___________ are allocated first to the FMV of assets and then to goodwill.

Answer 9

price paid for an investment; book value of the investee’s net assets

Question 10

Differences between the price paid for an investment and the book value of the investee’s net assets are allocated first to the ______________.

Answer 10

FMV of assets and then to goodwill.

Question 11

For Equity Method - Excess fixed asset FMV is depreciated; the excess value of __________ are not amortized.

Answer 11

land and goodwill

Question 12

What Is the JE to record the excess fixed asset FMV

Answer 12

Dr Equity in invested income. C Investment in XXXX

Question 13

What is the base formula for Equity Method Investment Account

Answer 13

B A S E. ) Beg Balance, Add investors share of income Subtract - Investors share of dividends, E ending balance

Question 14

When significant influence is obtained in a step-by-step acquisition, the equity method is applied prospectively by adding __________ to the _______ of the original investment.

Answer 14

the cost of the additional investment; Carrying value

Question 15

If the investment was previously accounted for as an available-for-sale security, the holding gains and losses in _________ are recognized in ________.

Answer 15

other comprehensive income; income statement