Day 65 - Equity Method & Cash Flows

Question 1

In troubled debt restructuring, the asset is adjusted to ____ to determine gain/loss

Answer 1

Fair value

MCQ-00532

Question 2

An investor discontinued the equity method for accounting for an investment when the investment hit zero. When does the investor resume accounting for the investment under the equity method?

Answer 2

When the investee returns to profitability and net loses cover the investors investment

MCQ-16153

Question 3

How are liquidating dividends treated?

Answer 3

NOT AS DIVIDEND INCOME

Treated as a reduction to the investment account

If a cash dividend is declared but not received until year 2, dividend income is reported in year 1

MCQ-00533

Question 4

Under the equity method, investment income equals:

Answer 4

The proportional share of the investee net income

Cash Dividends are treated as a return of capital

MCQ-14853

Question 5

What is the correct accounting for goodwill using the equity method?

Answer 5

Under the equity method, goodwill is ignored

The entire investment is treated for impairment

MCQ-05099

Question 6

ABC has 10% of Tesla at 1/1/24, on August 1st ABC acquired additional shares of Tesla resulting in 40% ownership. When is the equity method used?

Answer 6

Equity Method is used at the date of acquiring significant influence - August 1st

If Tesla declared cash Dividends, ABC would account for 10% cash dividends from January to August

MCQ-00324

Question 7

When calculating cash flows from operating activities, gain on the sale of equipment is _____ from net income?

Answer 7

Subtracted

MCQ-08587

Question 8

Steps to determine net cash flows from operating activities: Net Income Adjustments

Answer 8

1. LESS Increases in Inventories and Prepaids
2. LESS Increases in AR
3. ADD Increases in AP & Accrued Expenses
4. ADD Depreciation and Amortization
5. LESS Gains
6. ADD Losses

MCQ-08587