Questions from Advanced Accounting

Q: On January 3, 2018, Matteson Corporation acquired 40 percent of

On January 3, 2018, Matteson Corporation acquired 40 percent of the outstanding common stock of O’Toole Company for $1,160,000. This acquisition gave Matteson the ability to exercise significant influ...

Q: Why does the equity method record dividends from an investee as a

Why does the equity method record dividends from an investee as a reduction in the investment account, not as dividend income?

Q: On January 1, 2018, Fisher Corporation paid $2,

On January 1, 2018, Fisher Corporation paid $2,290,000 for 35 percent of the outstanding voting stock of Steel, Inc., and appropriately applies the equity method for its investment. Any excess of cost...

Q: On January 1, 2017, Ridge Road Company acquired 20 percent

On January 1, 2017, Ridge Road Company acquired 20 percent of the voting shares of Sauk Trail, Inc., for $2,700,000 in cash. Both companies provide commercial Internet support services but serve marke...

Q: On January 1, 2017, Alison, Inc., paid $

On January 1, 2017, Alison, Inc., paid $60,000 for a 40 percent interest in Holister Corporation’s common stock. This investee had assets with a book value of $200,000 and liabilities of $75,000. A pa...

Q: On January 1, 2018, Alamar Corporation acquired a 40 percent

On January 1, 2018, Alamar Corporation acquired a 40 percent interest in Burks, Inc., for $210,000. On that date, Burks’s balance sheet disclosed net assets with both a fair and book value of $360,000...

Q: Which of the following does not indicate an investor company’s ability to

Which of the following does not indicate an investor company’s ability to significantly influence an investee? a. Material intra-entity transactions. b. The investor owns 30 percent of the investee bu...

Q: Hawkins Company has owned 10 percent of Larker, Inc., for

Hawkins Company has owned 10 percent of Larker, Inc., for the past several years. This ownership did not allow Hawkins to have significant influence over Larker. Recently, Hawkins acquired an addition...

Q: Under fair-value accounting for an equity investment, which of

Under fair-value accounting for an equity investment, which of the following affects the income the investor recognizes from its ownership of the investee? a. The investee’s reported income adjusted f...

Q: When an equity method investment account is reduced to a zero balance

When an equity method investment account is reduced to a zero balance a. The investor should establish a negative investment account balance for any future losses reported by the investee. b. The inve...