Advanced Accounting 12th Edition Paul M Fischer William J Taylor Rita H Cheng – Test Bank

Advanced Accounting 12th Edition Paul M Fischer William J Taylor Rita H Cheng – Test Bank With Verified Questions And Answers Chapter_03_Consolidated_Statements_Subsequent_to_Acquisition 1. The method of accounting for subsidiaries that better reflects the investment account on parent-only financial statements is the a. cost method. b. simple equity method. c. investment method. d. sophisticated equity method. ANSWER: d RATIONALE: Under the sophisticated equity method the subsidiary income, and therefor the excess fair value over book value of the net assets acquired. DIFFICULTY: E LEARNING OBJECTIV ES: ADAC.FISC.3-1 2. The method of accounting for subsidiaries that is required for influential investments is the a. cost method. b. simple equity method. c. investment method. d. sophisticated equity method. ANSWER: d RATIONALE: The sophisticated equity method is required by GAAP for unconsolidate DIFFICULTY: E LEARNING OBJECTIVES: ADAC.FISC.3-1 3. The method of accounting for subsidiaries where investment income is limited to dividends received is the a. cost method. b. simple equity method. c. investment method. d. sophisticated equity method.