Solution Manual For Financial Accounting Robert Libby 10th Edition

Solution Manual For Financial Accounting Robert Libby 10th Edition

Solution Manual For Financial Accounting Robert Libby 10th Edition
Financial Accounting Robert Libby 10th Edition – Solution Manual
Financial Accounting Robert Libby 10th Edition
Financial Accounting Robert Libby

Financial Accounting, 10e (Libby)

Appendix A  Reporting and Interpreting Investments in Other Corporations

1) The extent of influence and control over another company is a critical factor in determining the proper method of accounting for an investment in the common stock of another company.

Answer:  TRUE

Explanation:  The percentage of ownership is a major criterion for the method chosen to account for the investment, but such a percentage does not guarantee significant influence.

Difficulty: 1 Easy

Topic:  Distinguish accounting for investments

Learning Objective:  A-02 Analyze and report passive investments in equity securities using the fair value method.; A-03 Analyze and report investments involving significant influence using the equity method.; A-04 Analyze and report investments in controlling interests.

Bloom’s:  Remember

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

2) All investments other than held-to-maturity bond investments are reported on the balance sheet at their fair value as of the balance sheet date.

Answer:  FALSE

Explanation:  Investments classified as available-for-sale and trading securities are reported on the balance sheet at fair value. Investments for which there is significant influence are reported using the equity method. Investments for which there is more than 50% ownership are reported using the acquisition method and consolidation accounting.

Difficulty: 2 Medium

Topic:  Distinguish accounting for investments

Learning Objective:  A-02 Analyze and report passive investments in equity securities using the fair value method.; A-03 Analyze and report investments involving significant influence using the equity method.; A-04 Analyze and report investments in controlling interests.

Bloom’s:  Understand

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

3) Investments in bonds intended to be sold before they reach maturity should be reported under the fair value method.

Answer:  TRUE

Explanation:  Investments in bonds intended to be sold are reported on the balance sheet at fair value. If the bonds are not intended to be sold then they are reported at amortized cost.

Difficulty: 2 Medium

Topic:  Held to maturity securities – Amortized cost; Fair value method accounting

Learning Objective:  A-01 Analyze and report investments in debt securities using the amortized cost and fair value methods.

Bloom’s:  Understand

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation