Under the Partial Equity Method of Accounting for an Investment

question 48

Multiple Choice

Under the partial equity method of accounting for an investment,

• A) The investment account remains at initial value.
• B) Dividends received are recorded as revenue.
• C) The allocations for excess fair value allocations over book value of net assets at date of acquisition are applied over their useful lives to reduce the investment account.
• D) Amortization of the excess of fair value allocations over book value is ignored in regard to the investment account.
• E) Dividends received increase the investment account.

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Definitions:

Common Stock

Equity ownership in a corporation, granting shareholders voting rights and a share in the company's profits through dividends.

Fair Value

The amount receivable for an asset sale or payable to undertake a liability in a transaction structured among market actors at the point of evaluation.

Par Value

The face value of a bond or stock as stated by the issuing company.

Consolidated Inventories

Inventories of a consolidated entity that are reported as a combined total from all subsidiaries and the parent company.