F3 - Marketable Securities and Business Combinations

Question 1

Once a cost method investor becomes an equity method investor, the investment account must:

Answer 1

Retroactively reflect the proportionate share of investee income recognized at each percentage level investment.

Question 2

Under the cost method, receipt of dividend is recorded as:

Answer 2

Income and does not affect the investment account.

Question 3

Under the equity method, receipt of a dividend is recorded as:

Answer 3

A decrease in the investment account.

Question 4

Any goodwill created in an investment accounted for under the equity method is

Answer 4

Ignored. It is neither amortized nor tested for impairment. The entire investment (using the equity method) is subject to the impairment test.