Answer questions a through d for one of the two scenarios below.

1. The reporting treatment for investments in common stock depends on the level of ownership and the ability to influence the investee's policies. The reporting treatment may even change over time as ownership levels or other factors change. When investees are not consolidated, the investments typically are reported in the Investments section of the investor's balance sheet. However, the investor's income from those investments is not always easy to find in the investor's income statement.

Answers to the questions below can be found in the annual reports to stockholders and in their 10-K filings with the SEC (available at www.sec.gov (Links to an external site.) ).

a. How does Chevron Corporation account for its investments in affiliated companies?

b. How does the company account for issuances of additional stock by affiliates that change the company's proportionate dollar share of the affiliates' equity?

c. How does Chevron treat a difference associated with an equity-method investment?

d. How does Chevron account for the impairment of an equity investment?

2. A clerk in the accounting department recently entered trial balance data for the parent company and its subsidiaries in the company's consolidation program. After a few minutes of additional work needed to eliminate the intercompany investment account balances, the clerk expressed his/her satisfaction with having completed the consolidation worksheet. In reviewing the printout of the consolidation worksheet, other employees raised several questions, and you have been asked to respond to them. Indicate whether each of the following questions can be answered by looking at the data in the consolidation worksheet or not, and also indicate why or why not.

a. Is it possible to tell if the parent is using the equity method in recording its ownership of each subsidiary?

b. Is it possible to tell if the correct amount of consolidated net income has been reported?

c. One of the employees thought the parent company had paid well above the fair value of net assets for a subsidiary. Is it possible to tell by reviewing the consolidation worksheet?

d. Is it possible to determine from the worksheet the percentage ownership of a subsidiary held by the parent?

In your initial response, ensure you incorporate relevant real life scenarios and/or academic debates. include in bold type the above question(s) you are answering.