Cost Method Flashcards Preview

FAR > Cost Method > Flashcards

Flashcards in Cost Method Deck (12):
1

When is the cost method used?

<20% and does not exercise significant influence

2

What is another name for cost method?

Fair value method or available-for-sale method

3

What is the journal entry to record an investment at cost?

Dr. Investment in investee, Cr. Cash

4

What is the considered cost of an investment?

Fair value plus legal fees

5

What is the journal entry to record unrealized loss and adjust FV at year-end for marketable securities?

Dr. Unrealized holding losses(Other comprehensive Income), Cr. Investment in investee

6

What is the journal entry to record a return of capital distribution or liquidating dividend is a dividend in excess of investor's share of retained earnings?

Dr. Cash, Cr. Investment in investee

7

Are stock dividends recognized?

No

8

What is the journal entry to record the cost method does not recognize a prorated share of the investee's earnings as income to the investor/parent?

Dr. Cash, Cr. Dividend income

9

What is the journal entry to record distribution that exceeds investor's share of the investee's retained earnings?

Dr. Cash, Cr. Investment in investee

10

Is investment in investee adjusted for investee earnings?

No

11

What value is investment in investee adjusted to?

Fair value

12

What are cash dividends from the investee reported as?

Income by the investor