You Are the Accounting Manager for a Mid-Sized Electronics Retailer

question 90

Essay

You are the accounting manager for a mid-sized electronics retailer. Your accounting intern is having trouble understanding how your company accounts for its investments in the stock of other companies. You just spent the better part of the morning reviewing in detail all of the recording and reporting requirements but the intern is still fuzzy.
Complete the following table to compare and contrast for your intern the requirements for the different types of stock investments that your company might make. Be sure to use the legend provided.
Investments in Equity Securities Legend:
Accounting Method: Equity method, Equity method + Consolidation, or Fair value method
Impact of Dividend Receipts: Decrease investment, Eliminated, or Increase income
Reporting of unrealized gains/losses: Balance sheet, Income statement, or Not recognized

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Definitions:

Activity-based Costing

A costing method that assigns overhead and indirect costs to specific activities, providing a more accurate representation of product costs.

Direct Materials

Raw materials that are directly consumed in the manufacturing process of a product and are easily identifiable in the final product.

Unit Cost

The cost incurred to produce, store, and sell one unit of a product, calculated by dividing total costs by the number of units.

Cost Driver

A factor that causes the cost of an activity or process to change.