CH 3 - Becker

Question 1

Identify Equity GW

Identify GW Accounting Method for Equity

Answer 1

Difference BTW Purchase Price and FMV

NOTHING

Question 2

Equity Method Assets with higher FMV than BV
1 - Land
2 - Other
3 - Assets written off

Answer 2

1 - no change
2 - Amortization * Ownership % = Reduction in Equity and Investment
3 - Written off Portion * Ownership % = Reduction in Equity and Investment

Question 3

Stock DIVIDEND is reported as
Cost
Equity

CASH DIVIDEND
Cost
Equity

Liquidating Dividend
Cost
Equity

Answer 3

BOTH
MEMO

Revenue I/S
Return on Capital B/S

BOTH Reduction to total investment - B/S

Question 4

Equity Method Sale of Stock Formula

Answer 4

Cost
\+NI
- Dividends 
- Sales Price of Stock
= Gain or Loss

Question 5

Preferred Dividends Effect on
1 - NI
2 - Investment in Investee
3 - Cash

Answer 5

1 - reduction to total NI (because already included in NI)
2 - no effect
3 - increase cash component of NI

Question 6

Cost method adjusts investment in investee securities

Answer 6

TO FMV