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Flashcards in Equity Method and Joint Ventures Deck (14):
1

When is the equity method used?

20%-50% and significant influence

2

Do you use the equity method when ownership percentage is below 20% but have the ability to exercise significant influence?

Yes

3

What is the journal entry to record an investment?

Dr. Investment in investee, Cr. Cash

4

What is the investment recorded at?

FV of consideration plus legal fees

5

What is the journal entry to record an increase y the investor's/parent's ownership percentage of earnings of investee?

Dr. Investment in investee, Cr. Equity in earnings/investee income

6

What is the journal entry to decrease by the investor's/parent's ownership percentage of cash dividends from investee?

Dr. Cash, Cr. Investment in investee

7

What is the journal entry to record investee earnings?

Dr. Investment in investee, Cr. Equity in earnings/investee income

8

How do you calculate an investment balance?

Beginning balance + Investor's share of earnings - Investor's share of dividends = Ending balance

9

If an investor company owns both common and preferred stock of an investee company how is "significant influence" tested?

By amount of common stock

10

The calculation of the income from subsidiary to be reported on the income statement includes?

Preferred stock dividends and share of earnings

11

What do you with the asset fair value difference(premium) over related asset life?

Amortize over the life of the asset

12

What is the journal entry to record the additional amortization causing the investor's share of the investee's income to decrease?

Dr. Equity in investee income, Cr. Investment in investee

13

Is goodwill amortized or undergo impairment test?

No

14

What method does investors generally use to account for joint venture investments?

Equity method