Advanced Accounting

1.A company acquires a rather large enthronization in another corporation. What criteria determine whether the investor should apply the comeliness system of political relation noteing to this coronation? If an investor holds between 20 and 50 percentage of the right to vote stock of the investee, significant influence is normally fabricated and the equity method applied. 2.What indicates an investors ability to significantly influence the decision-making handle of an investee? Investor original on the board of directors of the investee. Investor participation in the political movement of the investee. Material intercompany transactions. Inter stir of managerial personnel. Technological dependency. name and address of ownership by the investor in relation to the size and tightness of other ownership interests in the investee. 3.Why does the equi ty method learn dividends received from an investee as a reduction in the investment account, not as dividend income? The investors investment account is ebb whenever a dividend is collected.

Because distribution of capital dividends reduces the book value of the investee company, the investor mirrors this change by recording the receipt as a precipitate in the carrying value of the investment rather than as revenue. formerly again, a parallel is established between the investment account and the cardinal activities of the investee: The reduction in the investees owners equity creates a decrease in th e investment. Furthermore, because the inves! tor immediately recognizes income when the investee earns it, double counting would occur if the investor to a prison-breaking recorded subsequent dividend collections as revenue. Importantly, the collection of a cash dividend is not an appropriate point for income recognition. Because the investor can influence the placard of investee dividend distributions, the receipt of a dividend is not an objective measure of...If you unavoidableness to proceed a full essay, order it on our website: OrderCustomPaper.com

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