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A. A cash dividend is received from the investee.
B. The investee reports a net income for the year.
C. The investor records additional depreciation related to the investment.
D. The investee reports a net loss for the year. 84. Which of the following increases the investment account under the equity method of accounting?
A. Decreases in the market price of the investee's stock.
B. Dividends paid by the investee that were declared in the previous year.
C. Net loss of the investee company.
D. None of the above is correct.
85. If the fair value of equity securities is not determinable and the equity method is not appropriate, the
securities should be reported at:
A. Amortized cost.
C. Consolidated value.
D. Net present value.
86. When the investor's level of influence changes, it may be necessary to change from the equity method
to another method. When the level of ownership falls from a range of 20% to 50% to less than 20%, the
equity method typically would be discontinued and the investment account balance would be carried over
A. Amortized cost on the date of ownership change.
B. Fair value on the date of ownership change.
C. Discounted present value on the date of ownership change.
D. The current balance, and this balance would serve as the new "cost."
87. When the investor's level of influence changes, it may be necessary to change to the equity method from
another method. When the level of ownership rises from less than 20% to a range of 20% to 50%, the
equity method typically would become appropriate and the investment account balance should be:
A. Retrospectively adjusted to the balance that would have existed if the equity method had been in effect
for prior years.
B. Carried over as is with no adjustment necessary.
C. Carried over at fair value on date of transfer.
D. Adjusted to reflect amortized cost.
88. On July 1, 2013, Tremen Corporation acquired 40% of the shares of Delany Company. Tremen paid
$3,000,000 for the investment, and that amount is exactly equal to 40% of the fair value of identifiable
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- Spring '09
- Balance Sheet, A. Securities