Javascript required
Skip to content Skip to sidebar Skip to footer
Home / Advanced Accounting Hoyle 12th Edition Chapter 1 Solutions

Advanced Accounting Hoyle 12th Edition Chapter 1 Solutions

solutions manual advanced accounting 12th edition by hoyle schaefer doupnik

  • Home
  • Economy & Finance
  • Solutions manual advanced accounting 12th edition by Hoyle schaefer doupnik

Download Solutions manual advanced accounting 12th edition by Hoyle schaefer doupnik

Post on 22-Jan-2018

5.428 views

  • Download

Embed Size (px)

TRANSCRIPT

  1. 1. Solutions Manual Advanced Accounting 12th Edition by Hoyle Schaefer Doupnik 1-1 Advanced Accounting 12th Edition by Hoyle Schaefer Doupnik Solutions Manual This is complete downloadable package SOLUTIONS MANUAL for Advanced Accounting 12th Edition by Joe Ben Hoyle, Thomas Schaefer, Timothy Doupnik, All chapters answers and Excel are included Complete download: https://testbankarea.com/?p=201 Visit for test bank link also Chapter 1 THE EQUITY METHOD OF ACCOUNTING FOR INVESTMENTS Chapter Outline I. Three methods are principally used to account for an investment in equity securities along with a fair value option. A. Fair value method: applied by an investor when only a small percentage of a companys voting stock is held. 1. Income is recognized when the investee declares a dividend. 2. Portfolios are reported at fair value. If fair values are unavailable, investment is reported at cost. B. Consolidation: when one firm controls another (e.g., when a parent has a majority interest in the voting stock of a subsidiary or control through variable interests, their financial statements are consolidated and reported for the combined entity. C. Equity method: applied when the investor has the ability to exercise significant influence over operating and financial policies of the investee. 1. Ability to significantly influence investee is indicated by several factors including representation on the board of directors, participation in policy-making, etc. 2. GAAP guidelines presume the equity method is applicable if 20 to 50 percent of the outstanding voting stock of the investee is held by the investor. Current financial reporting standards allow firms to elect to use fair value for any new investment in equity shares including those where the equity method would otherwise apply. However, the option, once taken, is irrevocable. Investee dividends and changes in fair value over time are recognized as income. On February 14, 2013, the FASB issued a Proposed Accounting Standards Update (ASU) entitled, Recognition and Measurement of Financial Assets and Financial Liabilities. The proposed ASU would eliminate the fair-value option for investments that qualify for equity method treatment. Fair-value accounting, however, would be extended to equity method investments that meet the criteria for classification as held for sale. II. Accounting for an investment: the equity method A. The investment account is adjusted by the investor to reflect all changes in the equity of the investee company.
  2. 2. Chapter 01 - The Equity Method of Accounting for Investments 1-2 B. Income is accrued by the investor as soon as it is earned by the investee. C. Dividends declared by the investee create a reduction in the carrying amount of the Investment account. The text assumes all investee dividends are declared and paid in the same reporting period.
  3. 3. Solutions Manual Advanced Accounting 12th Edition by Hoyle Schaefer Doupnik 1-3 III. Special accounting procedures used in the application of the equity method A. Reporting a change to the equity method when the ability to significantly influence an investee is achieved through a series of acquisitions. 1. Initial purchase(s) will be accounted for by means of the fair value method (or at cost) until the ability to significantly influence is attained. 2. At the point in time that the equity method becomes applicable, a retrospective adjustment is made by the investor to convert all previously reported figures to the equity method based on percentage of shares owned in those periods. 3. This restatement establishes financial statement comparability across years. B. Investee income from other than continuing operations 1. The investor recognizes its share of investee reported other comprehensive income (OCI) through the investment account and the investors own OCI. 2. Income items such as extraordinary gains and losses and discontinued operations that are reported separately by the investee should be shown in the same manner by the investor. The materiality of these other investee income elements (as it affects the investor) continues to be a criterion for separate disclosure. C. Investee losses 1. Losses reported by the investee create corresponding losses for the investor. 2. A permanent decline in the fair value of an investees stock should be recognized immediately by the investor as an impairment loss. 3. Investee losses can possibly reduce the carrying value of the investment account to a zero balance. At that point, the equity method ceases to be applicable and the fair-value method is subsequently used. D. Reporting the sale of an equity investment 1. The investor applies the equity method until the disposal date to establish a proper book value. 2. Following the sale, the equity method continues to be appropriate if enough shares are still held to maintain the investors ability to significantly influence the investee. If that ability has been lost, the fair-value method is subsequently used. IV. Excess investment cost over book value acquired A. The price an investor pays for equity securities often differs significantly from the investees underlying book value primarily because the historical cost based accounting model does not keep track of changes in a firms fair value. B. Payments made in excess of underlying book value can sometimes be identified with specific investee accounts such as inventory or equipment. C. An extra acquisition price can also be assigned to anticipated benefits that are expected to be derived from the investment. In accounting, these amounts are presumed to reflect an intangible asset referred to as goodwill. Goodwill is calculated as any excess payment that is not attributable to specific assets and liabilities of the investee. Because goodwill is an indefinite-lived asset, it is not amortized. V. Deferral of unrealized gross profit in inventory A. Profits derived from intra-entity transactions are not considered completely earned until the transferred goods are either consumed or resold to unrelated parties.
  4. 4. Chapter 01 - The Equity Method of Accounting for Investments 1-4 B. Downstream sales of inventory 1. Downstream refers to transfers made by the investor to the investee. 2. Intra-entity gross profits from sales are initially deferred under the equity method and then recognized as income at the time of the inventorys eventual disposal. 3. The amount of gross profit to be deferred is the investors ownership percentage multiplied by the markup on the merchandise remaining at the end of the year. C. Upstream sales of inventory 1. Upstream refers to transfers made by the investee to the investor. 2. Under the equity method, the deferral process for unrealized profits is identical for upstream and downstream transfers. The procedures are separately identified in Chapter One because the handling does vary within the consolidation process. Answers to Discussion Questions The textbook includes discussion questions to stimulate student thought and discussion. These questions are also designed to allow students to consider relevant issues that might otherwise be overlooked. Some of these questions may be addressed by the instructor in class to motivate student discussion. Students should be encouraged to begin by defining the issue(s) in each case. Next, authoritative accounting literature (FASB ASC) or other relevant literature can be consulted as a preliminary step in arriving at logical actions. Frequently, the FASB Accounting Standards Codification will provide the necessary support. Unfortunately, in accounting, definitive resolutions to financial reporting questions are not always available. Students often seem to believe that all accounting issues have been resolved in the past so that accounting education is only a matter of learning to apply historically prescribed procedures. However, in actual practice, the only real answer is often the one that provides the fairest representation of the a firms transactions. If an authoritative solution is not available, students should be directed to list all of the issues involved and the consequences of possible alternative actions. The various factors presented can be weighed to produce a viable solution. The discussion questions are designed to help students develop research and critical thinking skills in addressing issues that go beyond the purely mechanical elements of accounting. Did the Cost Method Invite Manipulation? The cost method of accounting for investments often caused a lack of objectivity in reported income figures. With a large block of the investees voting shares, an investor could influence the amount and timing of the investees dividend declarations. Thus, when enjoying a good earnings year, an investor might influence the investee to withhold declaring a dividend until needed in a subsequent year. Alternatively, if the investor judged that its current year earnings needed a boost, it might influence the investee to declare a current year dividend. The equity method effectively removes managers ability to increase current income (or defer income to future periods) through their influence over the timing and amounts of investee dividend declarations. At first glance it may seem that the fair value method allows managers to manipulate income because investee dividends are recorded as income by the investor. However, dividends paid typically are accompanied by a decrease in fair value (also recognized in income), thus leaving reported net income unaffected.
  5. 5. Solutions Manual Advanced Accounting 12th Edition by Hoyle Schaefer Doupnik 1-5 Does the Equity Method Really Apply Here? The discussion in the case between the two accountants is limited to the reason for the investment acquisition and the current percentage of ownership. Instead, they should be examining the actual interaction that currently exists between the two companies. Although

Recommended

CHAPTER 04 AdvanWeb view2009-01-21Investment account balance indicates the initial value method. ... Hoyle, Schaefer, Doupnik, Fundamentals of Advanced Accounting, 1/e 4-26

hoyle advanced accounting

BONDI-HOYLE-LYTTLETON ACCRETION ONTO A PROTOPLANETARY throop/files/mt09.pdf · BONDI-HOYLE-LYTTLETON

146066793 Advanced Accounting 11e by Joe Ben Hoyle Thomas Schaefer Timothy Doupnik

Hoyle Update

Schaefer 1954

Schaefer c9

Ccp2011 12 schaefer

New Protocols HTTP2 and TLS v1 - ... UK New Protocols --HTTP/2 and TLS v1.3 آ©Joe Doupnik 2018 Joe Doupnik

Schaefer c10

REU Undergraduates: Janae Hoyle, Jesse Smith, Phillip REU Undergraduates: Janae Hoyle, Jesse Smith,

Marketing Fundamentals - BUAD 307 - University of viewKieso, Weygandt, Warfield, Intermediate Accounting, Fourteenth Edition Hoyle, Shafer Doupnik, Advanced Accounting, Eleventh Edition

CHAPTER 2 CONSOLIDATION OF FINANCIAL INFORMATION Hoyle, Schaefer, Doupnik, Advanced Accounting, 9/e

Hoyle 11e Chapter 10

RETHINKING GUARDIANSHIP DOHN HOYLE

SPREADSHEET APPLICATIONS TEMPLATE viewADVANCED ACCOUNTING, Twel th Edition, by Hoyle, Schaefer, and Doupnik. It is designed to provide you, the student, with experience in using microcomputers

Hoyle Ch3 Solutions

SSI SCHAEFER

246121673 Chapter Five Hoyle

Hoyle casino manual ntsc dreamcast

View more >

Advanced Accounting Hoyle 12th Edition Chapter 1 Solutions

Source: https://vdocument.in/solutions-manual-advanced-accounting-12th-edition-by-hoyle-schaefer-doupnik.html