Reference no: EM132789440
Problem 1: Say which of the following three statements is (are) true:
ONE: 20% investment is an automatic criterion; that is, if the investment is less than 20%, the equity method cannot be used.
TWO: If the investor owns 49% of the common shares of Investee, they have to use the equity method regardless of the circumstances.
THREE: The only way an investor can gain control over another company is by acquiring more than 50% of the common stock.
a. One, two and three
b. Only THREE
c. Two and three
d. None of the three
Problem 2: The fair value option (FVO) can be applied to the following investments:
a. Classified as Hold-to-Maturity (HTM)
b. Classified as available for sale (AFS)
c. Accounted for under the equity method
d. All of the above
Problem 3: Once the market value option (FVO) is adopted, the decision is irreversible.
a. TRUE
b. FALSE