Chapter 2 Reporting Intercorporate Investment and Consolidation of wholly owned subsidiaries with no differential

Investments are carried at fair value when

The investee does not have significant influence over the investee and the equity securities have readily determinable fair values.

If an investor purchases 40% of an investee's voting shares and this investment provides the investor with significant influence over the investee, the investor would apply with which of the following method to account for the investment

equity method

The equity method of accounting for investments in equity securities is appropriate when

Consolidation is not appropriate and the investor has the ability to exercise significant influence over the investee

Under the fair value method of accounting for investments in equity securities, income is recognized when

Dividends are declared by the investee

Which of the following are true regarding the equity method of accounting for investments in equity securities

Income recognized from the investee is reported as one line in the investor's income statement. The investment is reported as one line in the investors balance sheet It is appropriate when the investor has the ability to exercise significant influence over the investee and consolidation is appropriate.