Slanted Building Supplies - Equity or cost
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Slanted Building Supplies purchased 32 percent of the voting shares of Flat Flooring Company in March
20X3. On December 31, 20X3, the officers of Slanted Building Supplies indicated they needed advice
on whether to use the equity method or cost method in reporting their ownership in Flat Flooring.
Required
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 contribution to Slanted's earnings in
20X4? Explain.
c. Why might the use of the equity method become more appropriate as the percentage of ownership
increases?
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Solution Summary
Detailed description equity method and cost method.
Education
- Chartered Accountant (Equivalent to CPA in US), Institute of Charted Accountants of India
- Bachelor of Commerce, West Bengal University
Recent Feedback
- "I got this feedback and I wanted to know if you can explain it to me. I noticed something within your workings which I believe is incorrect. It looks like you've mistaken the Debt ratio for the Equity Multiplier. You've done a calculation to determine Return on Equity (ROE) but if you take a look at the ratios provided for us you'll see ROE listed on the bottom line already. You can use ROE, Profit Margin and Total Asset Turnover to figure out the Equity Multiplier amount. Equity multiplier is not provided for us and we need to calculate it. I really hope this is helpful to you. "
- "Very attentive to detail. Answers are designed in easy to understand format."
- "Fast response and thorough answer"
- "thank you very much! "
- "thank you so much !!!!!!!"
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