F4

Question 1

Equity Method Accounting

Answer 1

significant influence
Retroactive adjustments are not required
investment income is equal to the investor’s proportional share of the investee’s net income. Cash dividends are treated as a return of capital rather than investment income
When two or more purchases of stock cause ownership to go from less than 20% to more than 20%, the equity method should be used starting on the date significant influence is acquired and going forward.

Question 2

MV Debt securities> CA

Answer 2

Long term reported at Carrying Amount
Short term debt securities reported at Carrying Amount
unless there is a permanent decline in market value.

Question 3

Stock Dividend and Cash Dividend

Answer 3

Stock Dividend-does not affect revenue (only memo entry)
Cash Dividend-Reduces Investment Account does not affect revenue

Question 4

Dividend>Investors share of investee’s undistributed earnings

Answer 4

dividend revenue=dividends received this year that were not in excess of the investor’s share of investee’s undistributed earnings since the date of investment.

Question 5

Direct cots of combination, other than registration an issuance of equity securities

Answer 5

Deducted from net income from combined operations for period in which incurred

Question 6

Excluded from FV option

Answer 6

1.Investment in subsidiary
2.Pension benefit asset/liability
3.Assets/liabilities under lease

Question 7

Goodwill

Answer 7

Cash paid for investment-BV assets acquired-FV adj

Question 8

FIFO/LIFO

Answer 8

Fifo=Lower of cost or NRV
LIFO=Lower of cost or market

Question 9

Goodwill created under equity method

Answer 9

It is neither amortized nor tested for impairment.

Question 10

HTM and AFS securities sale

Answer 10

Investing activities