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SOLUTIONS MANUAL for Advanced Accounting, 15th Edition by Joe Ben Hoyle, Thomas Schaefer & Timothy Doupnik ISBN13: 9781264798483 A+ $14.99
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SOLUTIONS MANUAL for Advanced Accounting, 15th Edition by Joe Ben Hoyle, Thomas Schaefer & Timothy Doupnik ISBN13: 9781264798483 A+

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SOLUTIONS MANUAL for Advanced Accounting, 15th Edition by Joe Ben Hoyle, Thomas Schaefer & Timothy Doupnik ISBN13: 9781264798483 A+ TABLE OF CONTENTS_ Chapter 1: The Equity Method of Accounting for Inve stments Chapter 2: Consolidation of Financial Information Chapter 3: Consolidations—Subsequent...

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  • October 24, 2023
  • 254
  • 2023/2024
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  • 9781264798483
  • advanced accounting
  • solution manual advanced accounting
  • solution manual advanced accounting 15th edition
  • advance accounting by joe ben hoyle thomas f sch

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SOLUTIONS MANUAL FOR ADVANCED ACCOUNTING, 15TH

EDITION BY JOE BEN HOYLE, THOMAS SCHAEFER &

TIMOTHY DOUPNIK




A+ Page 1

, Advanced Accounting, 15th Edition by Joe Ben Hoyle




CHAPTER 1

THE EQUITY METHOD OF ACCOUNTING FOR INVESTMENTS



Chapter Outline



I. Four methods are principally used to account for an investment in equity securities along

with a fair value option.

A. Fair value method: applied by an investor when only a small percentage of a company’s

voting stock is held.

1. The investor recognizes income when the investee declares a dividend.

2. Portfolios are reported at fair value. If fair values are unavailable, investment is

reported at cost.

B. Cost Method: applied to investments without a readily determinable fair value. When the

fair value of an investment in equity securities is not readily determinable, and the

investment provides neither significant influence nor control, the investment may be

measured at cost. The investment remains at cost unless

1. A demonstrable impairment occurs for the investment, or

2. An observable price change occurs for identical or similar investments of the same

issuer.

The investor typically recognizes its share of investee dividends declared as dividend

income.

, C. Consolidation: when one firm controls another (e.g., when a parent has a majority

interest in the voting stock of a subsidiary or control through variable interests, their

financial statements are consolidated and reported for the combined entity.

D. Equity method: applied when the investor has the ability to exercise significant influence

over operating and financial policies of the investee.

3. Ability to significantly influence investee is indicated by several factors including

representation on the board of directors, participation in policy-making, etc.

4. GAAP guidelines presume the equity method is applicable if 20 to 50 percent of the

outstanding voting stock of the investee is held by the investor.



Current financial reporting standards allow firms to elect to use fair value for any new

investment in equity shares including those where the equity method would otherwise apply.

However, the option, once taken, is irrevocable. The investor recognizes both investee

dividends and changes in fair value over time as income.




II. Accounting for an investment: the equity method

A. The investor adjusts the investment account to reflect all changes in the equity of the

investee company.

B. The investor accrues investee income when it is reported in the investee’s financial

statements.




A+ Page 3

, Advanced Accounting, 15th Edition by Joe Ben Hoyle




C. Dividends declared by the investee create a reduction in the carrying amount of the

Investment account. This book assumes all investee dividends are declared and paid in

the same reporting period.

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