Chapter 3 Solutions

Chapter 03 - ConsolidationsSubsequent to the Date of Acquisition 1 Answers to Discussion Questions How Does a association Re eachy Decide which Investment Method to accommodate? Students tummy come up with literally dozens of factors that should be considered by Pilgrim in making the decision as to the ruler of mode of accounting for its subsidiary, Crestwood Corporation. The following is simply a fond(p) list of practical points to consider. ? Use of the information. If Pilgrim does not monitor its take in income levels closely, applying the lawfulness method would seem to be a toss off of time and energy. A company must plan to persona the additional info before the task of accumulation becomes worthwhile. size of it of the subsidiary. If the subsidiary is plumping in comparison to Pilgrim, the effort necessitate of the lawfulness method may be important. Income levels would probably be earthshaking. However, if the subsidiary is really quite small in coit ion to the parent, the impact powerfulness not be material becoming to warrant the pointless effort. Size of dividend payments. If Crestwood pays out most of its allowance each result as dividends, that figure will resemble equity income. slight additional information would be accrue by applying the equity method.

In contrast, if dividends are small or not nonrecreational on a regular basis, a Dividend Income balance magnate vastly understate the profits to be recognized by the business combination. Amount of excess amortizations. If Pilgrim has paying a signifi stopt amount in excess of contain value so t hat annual amortization charges are quite hi! gh, use of the equity method might be preferred to show the doing of this disbursement each month (or whenever internal report is made). In this case, waiting until the end of the year and recording all of the expense at one time through a worksheet introduction might not be the best trend to resound the impact of the expense. Amount of intercompany transactions. As with amortization, the volume of transfers can be an important element in deciding...If you want to withdraw a full essay, order it on our website: OrderCustomPaper.com

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