Professional Documents
Culture Documents
Stock Investments-
Investor Accounting and Reporting
Aprilia Beta Suandi
Faculty of Economics and Business
Universitas Gadjah Mada
Levels of Influence or Control
Investment's carrying
Degree of influence Investment income
value
* The investor could manipulate its own investment income if income is measured by dividends.
No record.
Note: market price: $25/share; no revaluation needed.
An Exception
If dividend received exceeds the investor’s share of
earnings after the investment has been acquired:
Net income is $15,000 and $2,000 dividend is received.
Ownership: 20%, investment acquired in the mid year.
$50,000 cost
- $2,000 dividends
One-line
+ $2,500 income
Consolidation
= $50,500
Applying the Equity Method
Cash 110
Gain on bargain purchase 10
Illustration: Bargain Purchase
Dividends paid
Cash (+A) 10 blank
Investment in Sax (-A) blank 10