For Each of the Following Numbered Situations Below, Select the Best

question 31

Essay

For each of the following numbered situations below, select the best letter answer concerning accounting for investments:
(A) Increase the investment account.
(B) Decrease the investment account.
(C) Increase dividend revenue.
(D) No adjustment necessary.
(1.) Income reported by 40% owned investee.
(2.) Income reported by 10% owned investee.
(3.) Loss reported by 40% owned investee.
(4.) Loss reported by 10% investee.
(5.) Change from fair-value method to equity method.Prior income exceeded dividends.
(6.) Change from fair-value method to equity method.Prior income was less than dividends.
(7.) Change from equity method to fair-value method.Prior income exceeded dividends.
(8.) Change from equity method to fair-value method.Prior income was less than dividends.
(9.) Dividends received from 40% investee.
(10.) Dividends received from 10% investee.
(11.) Purchase of additional shares of investee.
(12.) Investor's share of gross profit from intra-entity inventory sales when using the equity method.

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Definitions:

Book Value

The net value of a company's assets subtracted by its liabilities and preferred stock, indicating what remains for common shareholders according to accounting standards.

Market Value

The existing cost for buying or selling an asset or company in the market.

Taxable Income

The amount of an individual's or entity's income used to determine how much tax is owed, calculated by deducting allowable deductions and exemptions from gross income.

Tangible Asset

Physical and material assets that can be seen, touched, or quantified, such as machinery, buildings, and inventory.