Advanced Accounting

1.A company acquires a rather large enthronization in another corporation. What criteria determine whether the investor should apply the beauteousness system of governing body noteing to this enthronisation? If an investor holds between 20 and 50 percentage of the choose stock of the investee, significant influence is normally fabricated and the equity method applied. 2.What indicates an investors ability to significantly influence the decision-making handle of an investee? Investor model on the board of directors of the investee. Investor participation in the political wreak of the investee. Material intercompany transactions. Inter stir of managerial personnel. Technological dependency. tip of ownership by the investor in relation to the size and slow-wittedness of other ownership interests in the investee. 3.Why does the equity method pictur e dividends received from an investee as a reduction in the investment account, not as dividend income? The investors investment account is ebb whenever a dividend is collected.

Because distribution of money dividends reduces the book value of the investee company, the investor mirrors this change by recording the receipt as a precipitate in the carrying value of the investment rather than as revenue. formerly again, a parallel is established between the investment account and the underlie activities of the investee: The reduction in the investees owners equity creates a decrease in the investment. Furthermore, because the investor immediately recognizes income when the inves tee earns it, double counting would occur if! the investor to a break recorded subsequent dividend collections as revenue. Importantly, the collection of a cash dividend is not an appropriate point for income recognition. Because the investor can influence the rate of investee dividend distributions, the receipt of a dividend is not an objective measure of...If you unavoidableness to gain a full essay, order it on our website: OrderEssay.net

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