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Basic Question 18 of 20
Lewis Corporation has owned 75% of the common stock of Clark Corporation throughout the year. What is the proper balance sheet presentation for Lewis' investment at year-end?
B. The investment account will be presented in the noncurrent asset section of the balance sheet according to the equity method.
C. The investment account will be eliminated, and consolidated financial statements will be presented.
A. The investment account will be presented in the noncurrent asset section of the balance sheet as available-for-sale securities.
B. The investment account will be presented in the noncurrent asset section of the balance sheet according to the equity method.
C. The investment account will be eliminated, and consolidated financial statements will be presented.
User Contributed Comments 2
| User | Comment |
|---|---|
| vi2009 | acquisition method ... consolidation of accounts. Equity method for minority active investment = 1 liner for B/S and I/S |
| davidt876 | proportional consolidation for significant influence (20-50%) = % of BV of assets, liabilities and equity added to investor's balance sheet. but remember both the investee's retained earnings and commons stock get rolled together, and a % of that figure is added to the common stock of the investor (no change to investor's retained earnings) |
I used your notes and passed ... highly recommended!
Lauren
Learning Outcome Statements
describe the classification, measurement, and disclosure under International Financial Reporting Standards (IFRS) for 1) investments in financial assets, 2) investments in associates, 3) joint ventures, 4) business combinations, and 5) special purpose and variable interest entities;
distinguish between IFRS and US GAAP in their classification, measurement, and disclosure of investments in financial assets, investments in associates, joint ventures, business combinations, and special purpose and variable interest entities;
analyze how different methods used to account for intercorporate investments affect financial statements and ratios.
CFA® 2025 Level II Curriculum, Volume 2, Module 10.