ACC 307 - Chapter 1 & 2 Questions And Answers Latest Update

The method that requires income to be recognized by the investor as it is earned by the investee, not
when dividends are received. - ANS-✔✔Equity method of accounting
Intercompany transfers made by investee to investor are called? - ANS-✔✔Upstream sale
Minimum percentage at which a firm begins using the equity method of accounting - ANS-✔✔20%
Investor representation on the Board of Directors is a measure of this - ANS-✔✔Significant influence
Method that recognizes only the subsidiary's dividends as income while the asset balance remains at
cost - ANS-✔✔Cost method
Losses that are permanent in nature are reflected in which statement? - ANS-✔✔Income statement
Any extra payment that cannot be attributed to a specific asset or liability is assigned to this account -
ANS-✔✔Goodwill
Two companies come together, and only one remains in existence as an identifiable entity - ANS-✔✔
Statutory merger
Using the acquisition method, direct cost are a part of this account - ANS-✔✔Consolidation expense
Two alternatives to the Acquisition method - ANS-✔✔Pooling of interest and purchase method
Consolidated assets for totals include the book value of the parent + the ______ of the subsidiary. - ANS-
✔✔fair market value
If the fair value of a reporting unit falls below its carrying value, this will happen - ANS-✔✔Impairment
This results when the cost of the subsidiary is less than the Fair Market Value - ANS-✔✔Bargain
purchase
FASB 142 recommends this as the life of goodwill - ANS-✔✔Indefinite
Intangible assets other than goodwill, have this as their estimated life. - ANS-✔✔Their economic or
legal life
Customer lists and customer contracts are an example of this type of intangible asset - ANS-✔✔Related
intangibles