FAR 4.2 - Equity Method

Question 1

The equity method is used to account for investments if:

Answer 1

Significant influence can be exercised

Question 2

Consolidated statements should be presented when ownership is greater than:

Answer 2

50%

Question 3

A company is presumed to be able to exercise significant influence over the operating and financials policies of the investee if the company owns:

Answer 3

Between 20 - 50 percent of voting stock of the investee company

Question 4

Stock dividends require a :

Answer 4

Memo entry ONLY
No JE

Question 5

Significant influence test is generally met by the amount of what owned?

Answer 5

Common stock

Question 6

Calculation for the income from subsidiary to be reported on the income statement is:

Answer 6

Sub’s earnings - preferred dividends = subs net income available to common shareholders

Question 7

An impairment on aa equity method investment is recognized when:

Answer 7

The fair value of the investment falls below the carrying value
And
The decline in value is permanent