When an investor uses the equity method to account for investments in common st
from the investee should be recorded as
A deduction from the investment account
Which of the following does not indicate an investor company's ability to significantl
2 an investee?
The investor ownd 30 percent of the investee, but another owner holds the reman
Sisk company has owned 10 percent of Maust, Inc., for the past several years.
allow Sisk to have significant influence over Maust.
Recently , Sksk acquired an ad
of Maust and now will use the equity method.
How will the investor report this chang
A retrospective adjustmetn is made to restore all prior years using the equity met
On January 1,
Puckett Company paid $1.6 million for 50,000 shares of Harrison's v
which represents a 40 percent investment.
No allocation to goodwill of other specific
Significant influence over Harrison is achieved by this acquisition and so Puckett app
Harrison distributed a dividend of $2 per share during the years and reported net inc
What is balance in the Investment in Harrison account found in Puckett's finan
Equity income ($560,000 × 40%)
Dividends (50,000 shares × $2.00)
Investment in Harrison Corporation as of December 31
5 In January 2008, Wilkinson, Inc., acquired 20% of the outstanding common stock of Bremm, I
This investment gave Wilkinson the ability to exercise significant influence over Bremm.
recorded at $3,900,000 with liabilities of $900,000.
Any excess of cost over book value of the
to a patent having a remaining useful life of 10 years.
In 2008, Bremm reported net income of $170,000.
In 2009, Bremm reported net income of $2
paid in each of these two years.
What is the equity method balance of Wilkinsong's invetsem
Income accruals: 2008—$170,000 × 20%
2009—$210,000 × 20%
Amortization (below): 2008
Dividends: 2008—$70,000 × 20%
2009—$70,000 × 20%
Investment in Bremm, December 31, 2009
Bremm’s net assets acquired ($3,000,000 × 20%)
Annual amortization (10 year life)