Questions from Financial Accounting

Q: Describe the rationale for why an investor using the equity method must

Describe the rationale for why an investor using the equity method must eliminate any intercompany profit or loss on transactions between the investor and the investee.

Q: Why is the outcome of applying the equity method sometimes described as

Why is the outcome of applying the equity method sometimes described as a one-line consolidation? Consider both the balance sheet and the income statement in your response.

Q: Accounting for an investment in a subsidiary using the equity method and

Accounting for an investment in a subsidiary using the equity method and not consolidating it yields the same net income as consolidating the subsidiary. Total assets will differ depending on whether...

Q: Distinguish between minority investments in other companies and the non controlling,

Distinguish between minority investments in other companies and the non controlling, or minority, interest in a consolidated subsidiary.

Q: Consider the following statement: “When a firm repurchases its shares

Consider the following statement: “When a firm repurchases its shares, the shares disappear.” Do you agree?

Q: A firm contemplates issuing 10,000 shares of $100 par

A firm contemplates issuing 10,000 shares of $100 par value preferred stock. The preferred stock promises a $4 per share annual dividend. The firm considers making this preferred stock callable or con...

Q: The terms of sale “2/10, net/30

The terms of sale “2/10, net/30” mean that the buyer can take a discount of 2% from gross invoice price by paying the invoice within 10 days; otherwise, the buyer must pay the full amount within 30 da...

Q: Compare and contrast a stock option, a stock right, and

Compare and contrast a stock option, a stock right, and a stock warrant. How does the accounting for these three differ?

Q: Stock option valuation models indicate that the value of a stock option

Stock option valuation models indicate that the value of a stock option increases with the volatility of the stock, increases with the time between the grant date and the expected exercise date, and d...

Q: The accounting for stock options, stock dividends, and treasury stock

The accounting for stock options, stock dividends, and treasury stock clouds the distinction between capital transactions and income transactions.” Explain.