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ACCT 405 Chapter 1 Problems: 1 3 5 9 10 11

ACCT 405 Chapter 1 Problems: 1 3 5 9 10 11

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ACCT 405 Chapter 1 Problems: 1 3 5 9 10 11

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ACCT 405 Chapter 1 Problems: 1 3 5 9 10 11

Advanced Accounting

ACCT-405-14613 Chapter 1 Problems: 1 3 5 9 10 11

1.     When an investor uses the equity method to account for investments in common stock, cash dividends received by the investor from the investee should be recorded as

1.     A deduction from the investor’s share of the investee’s profits.

2.     Dividend income.

3.     A deduction from the stockholders’ equity account, Dividends to Stockholders.

4.     A deduction from the investment account. (AICPA adapted)

3.     Sisk Company has owned 10 percent of Maust, Inc., for the past several years. This ownership did not allow Sisk to have significant influence over Maust. Recently, Sisk acquired an additional 30 percent of Maust and now will use the equity method. How will the investor report this change?

1.     A cumulative effect of an accounting change is shown in the current income statement.

2.     No change is recorded; the equity method is used from the date of the new acquisition.

3.     A retrospective adjustment is made to restate all prior years presented using the equity method.

4.     Sisk will report the change as a component of accumulated other comprehensive income.

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