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Slanted Building Supplies purchased 32 percent of the voting

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Slanted Building Supplies purchased 32 percent of the voting shares of Flat Flooring company in March 20x3:

Q1:
A. What factors should be considered in determining whether equity-method reporting is appropriate?

B. Which of the two methods is likely to show the larger reported earnings in 20x4?

C. Why might the use of the equity method become more appropriate as the percentage of ownership increases?

Q2: Peel Company received a cash dividend from a common stock investment. Should Peel report an increase in the investment account if it uses the cost method or equity method of accounting?

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Your tutorial is 238 words plus a reference about equity method of accounting.

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As agreed with student, this tutorial only addresses the first two problems for one credit bid:

Slanted Building Supplies purchased 32 percent of the voting shares of Flat Flooring company in March 20x3:

Q1:
A. What factors should be considered in determining whether equity-method reporting is appropriate?
In US GAAP, the percent ownership drives the accounting method chosen. For ownership less than 20%, you use ...

Solution provided by:
Carol Sargent, PhD
Education
  • BSc, University of Virginia
  • MSc, University of Virginia
  • PhD, Georgia State University
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