Questions from Advanced Accounting

Q: Wilson Company acquired 40 percent of Andrews Company at a bargain price

Wilson Company acquired 40 percent of Andrews Company at a bargain price because of losses expected to result from Andrews’s failure in marketing several new products. Wilson paid only $100,000, altho...

Q: In a stock acquisition accounted for by the equity method, a

In a stock acquisition accounted for by the equity method, a portion of the purchase price often is attributed to goodwill or to specific assets or liabilities. How are these amounts determined at acq...

Q: Princeton Company holds a 40 percent interest in shares of Yale Company

Princeton Company holds a 40 percent interest in shares of Yale Company common stock. On June 19 of the current year, Princeton sells part of this investment. What accounting should Princeton make on...

Q: What is the difference between downstream and upstream sales? How does

What is the difference between downstream and upstream sales? How does this difference affect application of the equity method?

Q: How is the investor’s share of gross profit on intra-entity

How is the investor’s share of gross profit on intra-entity sales calculated? Under the equity method, how does the deferral of gross profit affect the recognition of equity income?

Q: How are intra-entity transfers reported in an investee’s separate financial

How are intra-entity transfers reported in an investee’s separate financial statements if the investor is using the equity method?

Q: What is the fair-value option for reporting equity method investments

What is the fair-value option for reporting equity method investments? How do the equity method and fair-value accounting differ in recognizing income from an investee?

Q: Milani, Inc., acquired 10 percent of Seida Corporation on January

Milani, Inc., acquired 10 percent of Seida Corporation on January 1, 2017, for $190,000 and appropriately accounted for the investment using the fair-value method. On January 1, 2018, Milani purchased...

Q: Tiberend, Inc., sold $150,000 in inventory to

Tiberend, Inc., sold $150,000 in inventory to Schilling Company during 2017 for $225,000. Schilling resold $105,000 of this merchandise in 2017 with the remainder to be disposed of during 2018. Assumi...

Q: What accounting treatments are appropriate for investments in equity securities without readily

What accounting treatments are appropriate for investments in equity securities without readily determinable fair values?