Author: Christine Farr


In years subsequent to the year of acquisition, an entry to establish reciprocity is made under the

Pall, Inc., owns 40% of the outstanding stock of Sibil Company. During 2014, Pall received a $4,000 cash dividend from Sibil. What effect did this dividend have on Pall’s 2014 financial statements?

Consolidated net income for a parent company and its partially owned subsidiary is best defined as the parent company’s

P Company purchased 80% of the outstanding common stock of S Company on May 1, 2014, for a cash payment of $318,000. S Company’s December 31, 2013 balance sheet reported common stock of $200,000 and retained earnings of $180,000. During the calendar year 2014, S Company earned $210,000 evenly throughout the year and declared a dividend of $75,000 on November 1. What is the amount needed to establish reciprocity under the cost method in the preparation of a consolidated workpaper on December 31, 2014?

Pine, Inc. owns 40% of Supra Corporation. During the year, Supra had net earnings of $200,000 and paid dividends of $50,000. Masters used the cost method of accounting. What effect would this have on the investment account, net earnings, and retained earnings, respectively?

Which one of the following describes a difference in how the equity method is applied under GAAP than under IFRS?

A parent company uses the partial equity method to account for an investment in common stock of its subsidiary. A portion of the dividends received this year were in excess of the parent company’s share of the subsidiary’s earnings subsequent to the date of the investment. The amount of dividend income that should be reported in the parent company’s separate income statement should be

Park Company acquired a 90% interest in Southwestern Company on December 31, 2013, for $320,000. During 2014 Southwestern had a net income of $22,000 and paid a cash dividend of $7,000. Applying the cost method would give a debit balance in the Investment in Stock of Southwestern Company account at the end of 2014 of:

In the preparation of a consolidated statement of cash flows using the indirect method of presenting cash flows from operating activities, the amount of the noncontrolling interest in consolidated income is

Under the partial equity method, the entry to eliminate subsidiary income and dividends includes a debit to

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