Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Husky acquired 25% of Cougar on January 1, 2020, and appropriately accounted for this investment using the Equity Method. One year later, on January 1,

Husky acquired 25% of Cougar on January 1, 2020, and appropriately accounted for this investment using the Equity Method. One year later, on January 1, 2021 Husky acquired and additional 50%, so that it now has control of Cougar and will prepare consolidated financial statements. In a step-acquisition such as this, how should the original 25% ownership be valued as of January 1, 2021, the date that Husky gains control of Cougar?

answer choices:

A. It should be adjusted to fair value at the date Husky gains control of Cougar, with the resulting gain or loss reported as a component of Other Comprehensive Income.

B. It should be maintained at the value previously calculated under the Equity Method of accounting.

C. It should be restated to its original cost on January 1, 2020

D. It should be adjusted to fair value at the date Husky gains control of Cougar, with a resulting gain or loss recorded in Net Income.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Comprehensive Assurance & Systems Tool

Authors: Laura R. Ingraham, Greg Jenkins

4th Edition

0134790472, 9780134790473

More Books

Students also viewed these Accounting questions

Question

Explain privacy concerns on the Web.

Answered: 1 week ago

Question

2 What are the steps that can aid effective communication?

Answered: 1 week ago