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ACCT 559 DeVry Midterm Exam

ACCT 559 DeVry Midterm

ACCT 559 DeVry Midterm Exam Downloading is very simple, you can download this Course here: http://mindsblow.us/question_des/ACCT559DeVryMidtermExam/4290 Or Contact us at: help@mindblows.us ACCT 559 DeVry Midterm Exam (TCO A) A company should always use the equity method to account for an investment if it has the ability to exercise significant influence and control over the operating policies of the investee. it has a controlling interest (more than 50%) of another company's stock. it owns 30% of another company's stock. the investment was made primarily to earn a return on excess cash. it does not have the ability to exercise significant influence over the operating policies of the investee. Question 2. Question : (TCO A) Hill Company owns 30% of the common stock of Davidson Co. and uses the equity method to account for the investment. During 20X2, Davidson reported income of $200,000 and paid dividends of $80,000. There is no amortization associated with the investment. During 20X2, how much income should Hill recognize related to this investment? $80,000 $99,000 $60,000 IN $51,000 $24,000 Question 3. Question : (TCO A) Under the equity method, when the company's share of cumulative losses equals its investment and the company has no obligation to fund such additional losses, which of the following statements is true? The investor should change to the fair-value method to account for its investment. The investor should report these losses as extraordinary items. The investor should suspend applying the equity method until the investee reports income. The investor should suspend applying the equity method and not record any equity in income of investee until its share of future profits is sufficient to recover losses that have not previously been recorded. The cumulative losses should be reported as a prior period adjustment. Instructor Explanation: Chapter 1. The investor suspension is temporary until the shares of future profits increase in a sufficient fashion or recoup the prior losses that were not recorded in the prior periods. Points Received: 5 of 5

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