New Study Plan Flashcard Deck 3
An entity should report an investment in marketable equity securities that does not result in significant influence or control over the investee
FV with holding gains and losses included in earnings bc the result don’t have significant influence
If investor uses the equity method to account for an investment
Increases by the shares of earnings of the investee and decrease both earnings and losses of the investee
Is the equity method require if the investment is classified as held to sale?
No
Under the equity method are dividends reported for stock dividend or cash dividend?
Neither should be reported should be reported
Are preferred dividends declared?
Yes
Example would be 100,000 common stock noncumulative preferred stock x 75% = 75,000
How are dividends treated for investee?
They are treated as return on investment which decreases. the investments balance
How will the equity method to account for investments in common stock, the investment account will be increased when the investor recognizes ?
a proportionate interest in the net income of the investee
When there is a prior period adjustment does the result cause a change in accounting principal or the correction of an error?
Results from the correction of an error
A computation of earnings per share includes simple capital structure of the following?
Common Stock, preferred Stock and debt outstanding
Are interest and rent accrued or deferred for appropriate cost purposes ?
Yes for both Rent and interest
When AFS Securities are transferred into trading category and the unrealized holding gain or loss transferred are not recognized in earnings shall be
recognized in earnings immediately during the transfer
A material loss is not a component of current period income from continuing operations when it is
A cumulative effect change in accounting principle
How are credit losses on AR accounts adjusted retrospectively and prospectively?
propectively
Calc the carrying amount of long term investment using the using the effective interest method?
To calc the carrying value of the long term investment we need to first calc the carrying amount add the discount for Year 1 and 2
456,200 x 10% interest = 45,620
500,000 x 8% bonds = 40,000
45,620 - 40,000 = 5,620
CV 456,200 + discount 5,620 = 461,820 Year 1 carrying amount
When an account is previously written off and that is not expected to be collected. What changes that cause to allowance of credit loss and AR?
It increases the allowance of credit losses
