lioneljeshu
Newbie
Joined: 17 Dec 2008
Online Status: Offline
Posts: 11
|
| Posted: 12 Jan 2009 at 14:02 | IP Logged
|
|
|
They would have accounted for this investment using the
cost method until July 31, 1992. On Aug 1, 1992 the
additional purchase of shares gives Point Inc
significant influence (40% ownership), mandating the
using of equity method. So Point Inc will claim 10% of
Iona's income till July 31 and 40% from Aug - Dec in
their Income Statement. And the dividends will not show
up on the I/S.
The Investment in subsidiary account(Point Inc's books)
will be increased by 10% & 40% of Iona's income and then
reduced for 40% of the dividends declared on Dec 31,
2002.
When ownership is obtained in stages like in the
question above, you will have to retroactively restate
as if accounted for using the equity method from the beginning.
__________________
FAR - 1/9/2009 - 93
AUD - 85
BEC - 89
REG -
|
Active Topics 
Memberlist 
Search 
Help
Register 
Login
Topic: Equity Method
Topic Closed)
On Jan 1 1992 Point Inc purchased 10% of Iona Co's common stock. Point purchased additional shares bringing its ownership up to 40% of Iona's common stock outstanding on Aug 1 1992. During Oct 1992 Iona declared and paid a cash dividend on all of its outstanding common stock. How much income from the Iona investment should Point's 1992 income statment report?
