chap12 - gains and losses are realized at sale of security...

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1 Acct 284 Chap. 12 CHAPTER 12 Reporting and Interpreting Investments in Other Corporations
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2 Acct 284 Chap. 12 Investments in Securities significant influence: own 20 - 50% of voting shares , the ability of the investing company to have an important impact on the operating and financing policies of another company control: own > 50% of voting shares , the ability of an investing company to determine the operating and financing policies of another company
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3 Acct 284 Chap. 12 Accounting Methods for Investments in Securities % of Stock Owned Method < 20 % Market Value 20 - 50% Equity > 50 % Consolidated
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4 Acct 284 Chap. 12 Market Value Method Securities are recorded at their current market value NOT historical cost unrealized holding gains and losses * allowance to adjust to market
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Unformatted text preview: gains and losses are realized at sale of security 5 Acct 284 Chap. 12 Equity Method own 20-50% of voting stock report investment income on the basis of income earned by investee company Acquisition - cost Dividends received - reduce investment % of income earned by investee company - increase investment 6 Acct 284 Chap. 12 Acquiring a Controlling Interest (&gt; 50% of stock) Why? * vertical integration * horizontal integration * synergy * diversification * special assets * undervalued opportunities Terms * parent * subsidiary * consolidated financial statements 7 Acct 284 Chap. 12 Ratio Analysis Return on Assets ROA = Net Income Average Total Assets = NPM * ATO...
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chap12 - gains and losses are realized at sale of security...

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