Chapter 3

Question 1

Parent Company Accounting
Equity Method
Investment

Answer 1

Continually adjusted to reflect ownership of acquired company.

Question 2

Parent Company Accounting
Initial Value
Investment

Answer 2

Remains at Initially

Recorded Cost

Question 3

Parent Company Accounting
Partial Equity
Investment

Answer 3

Adjusted only for accrued income and dividends received from acquired company.

Question 4

Parent Company Accounting
Equity Method
Income Account

Answer 4

Income accrued as earned; amortization and other adjustments are recognized.

Question 5

Parent Company Accounting
Initial Value
Income Account

Answer 5

Cash received is recorded as Dividend Income.

Question 6

Parent Company Accounting
Partial Equity
Income Account

Answer 6

Income accrued as earned; no other adjustments recognized

Question 7

Consolidation Entries
Equity Method
S.) Entry

Answer 7

Eliminates the subsidiary’s Stockholders’ equity account beginning balances and the book value component within the parent’s investment account.

Question 8

Consolidation Entries
Initial Value
S.) Entry

Answer 8

Same as Equity

Question 9

Consolidation Entries
Partial Value
S.) Entry

Answer 9

Same as Equity

Question 10

Consolidation Entries
Equity Method
A.) Entry

Answer 10

Recognizes the unamortized allocations as of the beginning of the current year associated with the adjustments to fair value.

Question 11

Consolidation Entries
Initial Value
A.) Entry

Answer 11

Same as Equity

Question 12

Consolidation Entries
Partial Value
A.) Entry

Answer 12

Same as Equity

Question 13

Consolidation Entries
Equity Method
I.) Entry

Answer 13

Eliminates the subsidiary dividends

Question 14

Consolidation Entries
Initial Value
I.) Entry

Answer 14

Eliminates the dividend income account the Sub’s dividend paid account.

Question 15

Consolidation Entries
Partial Value
I.) Entry

Answer 15

Eliminates the Parent’s equity in the Sub’s income and reduces the investment account.