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3. When the equity method is used to account for...

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3. When the equity method is used to account for investment in common stock, which of the following affect(s) the investor's reported investment income? A change in Fair Value Cash Dividends of Investee's Common Stock from Investee a YES YES b NO YES c YES NO d NO NO 4. A corporation uses the equity method to account for its 40% ownership of another company. The investee earned $20,000 and paid $5,000 in dividends. The investor made the following entries: Investment in affiliate $8,000 Equity in earnings of affiliate $8,000 Cash 2,000 Dividend revenue 2,000 What effect will these entries have on the investor's statement of financial position? a. Investment in affiliate overstated, retained earnings understated b. Fianncial position will be fairly stated c. Investment in affiliate overstated, retained earnings overstated. d. Investment in affiliate understated, retained earnings understated.

 

Paper#4841 | Written in 18-Jul-2015

Price : $25
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