Which of the following is allowed to be reported on fair value basis under SFAS 159?
Derivatives
Agwen Corporation owns 25% of the shares of Bronwo Corporation, which is traded on the New York Stock Exchange. Which method is Agwen most likely to use to account for this investment?
Equity method
The equity method of accounting for investments requires:
proportionate share of investee's earnings should be recorded as investment income.
Goodwill recorded as the result of an acquisition is defined as the purchase price less the book value of net assets.
FALSE
Company A acquires 40% of Company B in a stock-for-stock exchange. With respect to preparing financial statements, which of the following statements is correct?
Company A will most likely use the equity method.
When an acquisition is made and accounted for using the purchase method, the post-acquisition common stock account:
is the pre-acquisition common stock account of the acquiring company plus the fair value of new stock issued to affect the acquisition.
Held-to-maturity securities are equity securities that management intends and has the ability to hold to maturity
FALSE
If a company uses the purchase method to account for a merger, which of the following is true?
I. Prior year's statements must be restated as if merged companies had always been one company.
II. Net income of combined companies will probably be lower than
II. Net income of combined companies will probably be lower than net income of two separate companies added together.
IV. Assets of acquired company will be recorded on acquirer's books at their fair value.
The classification of marketable equity securities as trading or available-for-sale is determined:
by management's intent regarding the disposition of the securities.
All derivatives are recorded at market value on the balance sheet.
TRUE
Investment securities should always be reported at lower of cost or market.
FALSE
One of the problems with consolidated financial statements is that all intercompany transactions are not reported.
TRUE
Held-to-maturity securities are always classified as noncurrent assets.
FALSE