The Equity Method First Handout SummerI2009 (1)

The Equity Method First Handout SummerI2009 (1) -...

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Accounting 401 Accounting for Investments in Subsidiaries Summer I 2009 A. If the equity method is applied, it is assumed that the investor and investee(s) have an economic relationship. B. The investor first records the acquisition of the investee(s) based on the fair value of consideration given to acquire the investee(s). C. The carrying value of the investor’s investment is adjusted each period for the investor’s share of investee(s)’ reported net income (net loss) and dividends declared by investee companies. D. Investees’ reported net income increases the carrying amount of investor’s investment and increase investor’s revenues, while a reported net loss decreases investor’s investment and increases investor’s losses. Thus, accrual type adjustments are being recorded. E. All dividends declared by investees are considered partial liquidations of the investment and thus reduce investor’s investment account.
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This note was uploaded on 03/08/2012 for the course ACCT 401 taught by Professor Staff during the Summer '08 term at Texas A&M.

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The Equity Method First Handout SummerI2009 (1) -...

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