Gaw Company owns 15% of the common stock of Trace Corporation and used the fair-value method to account for this investment. Trace reported net income of $110,000 for 2013 and paid dividends of $60,000 on October 1, 2013. How much income should Gaw recognize on this investment in 2013?

Advanced Accounting Exam 1

Yaro Company owns 30% of the common stock of Dew Co. and uses the equity method to account for the investment. During 2013, Dew reported income of $250,000 and paid dividends of $80,000. There is no amortization associated with the investment. During 2013, how much income should Yaro recognize related to this investment?

It has the ability to exercise significant influence over the operating policies of the investee.

A company should always use the equity method to account for an investment if:

No accounting because the decline in fair value is temporary.

Club Co. appropriately uses the equity method to account for its investment in Chip Corp. As of the end of 2013, Chip&#039;s common stock had suffered a significant decline in fair value, which is expected to be recovered over the next several months. How should Club account for the decline in value?

- Dividends received are reported as revenue

All of the following statements regarding the investment account using the equity method are true except:
- The investment is recorded at cost
- Dividends received are reported as revenue
- Net income of investee increases the investment account.
- Dividends received reduce the investment account.
- Amortization of fair value over cost reduces the investment account.

Study with Quizlet and memorize flashcards containing terms like Gaw Company owns 15% of the common stock of Trace Corporation and used the fair-value method to account for this investment. Trace reported net income of $110,000 for 2013 and paid dividends of $60,000 on October 1, 2013. How much income should Gaw recognize on this investment in 2013?, Yaro Company owns 30% of the common stock of Dew Co. and uses the equity method to account for the investment. During 2013, Dew reported income of $250,000 and paid dividends of $80,000. There is no amortization associated with the investment. During 2013, how much income should Yaro recognize related to this investment?, A company should always use the equity method to account for an investment if: and more.

Advanced Accounting Exam 1 Flashcards

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