Class Ch 1 Question 22 - based on the remaining % of...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
Page31 - 22. Several years ago, Einstein, Inc., bought 40 percent of the outstanding voting stock of Brooks Company. The equity method is appropriately applied. On August 1 of the current year, Einstein sold a portion of these shares. 1. How does Einstein compute the book value of this investment on August 1 to determine its gain or loss on the sale? Beginning of the year balance + % of net income (or - % net loss) – dividends received = book value 2. How should Einstein account for this investment after August 1? If it doesn’t drop below 20% continue to use Equity method, but if it drops under 20% then switch to fair value method,
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: based on the remaining % of ownership 3. If Einstein retains only a 2 percent interest in Brooks so that it holds virtually no influence over Brooks, what figures appear in the investor's income statement for the current year? (a) Dividend Income for dividends received after August 1 (b) Gain/Loss on 1 Aug sale (c) Equity in Earnings to 1 Aug 4. If Einstein retains only a 2 percent interest in Brooks so that virtually no influence is held, does the investor have to retroactively adjust any previously reported figures? No...
View Full Document

This note was uploaded on 02/20/2012 for the course ACC 3101 taught by Professor Tom during the Spring '11 term at American University in Bulgaria.

Ask a homework question - tutors are online