Lesson 4 The Adjusted Cost Method & Equity Methos

Question 1

Gain or loss on trading securities is?

Answer 1

Sales proceeds- carrying value

Question 2

Equity=

Answer 2

Assets-liabilities

Question 3

Equity or net assets is a

Answer 3

Balance sheet component

Question 4

Net Revenue is a

Answer 4

Income statement component

Question 5

Operating income

Answer 5

Total revenue less total expenses

Question 6

Under IFRS and GAAP the equity method is applied when?

Answer 6

When an entity has the ability to exercise significant influence over the investor

Question 7

Under IFRS

Answer 7

That is the case when the investor has the power to participate in the decisions of the investee

Question 8

The equity method accounting approach used For joint operations is known as?

Answer 8

Proportionate consolidation approach

Question 9

When an entity accounts for investments in common stock under the equity method, it is required by ASC to disclose the following:

Answer 9

Name of each investee (not investor) and percentage of the entity’s ownership of each investee’s common stock

The entity’s accounting policies for investments in common stock

The difference, in any, between the carrying amount of the investment and the amount of the entity’s underlying equity in the investee’s net assets and the entity accounting treatment of the difference

Question 10

ASC 323-10-15-6 list the following factors as indicative of the ability to exercise significant influence over an investee:

Answer 10

1. Representation on the board of directors
2. Participation in policy-making processes
3. Material inter-entity transactions
4. Interchange of managerial personnel
5. Technological dependency