requirement 1,2,3

1.Wilson Inc. owns 10% of Mouse Company. In the most recent year, Mouse had net earnings of $60,000 and paid dividends of $8,000. Wilson accountant mistakenly assumed considerable influence and used the equity method instead of the cost method. What is the impact on the investment account and net earnings, respectively?

a. Understate and overstate. b. Overstate and understate.

c. Overstate and overstate. d. Understate and understate.

2.A business combination occurs when a company acquires an equity interest in another entity and has:

a. at least 20% ownership in the entity.

b. more than 50% ownership in the entity.

c. 100% ownership in the entity.

d. control over the entity, irrespective of the percentage owned.

3.FASB favors consolidation of two entities when

a. One acquires at least 20% equity ownership of the other.

b. One acquires between 20% and 50% equity ownership in the other.

c. One acquires two thirds equity ownership in the other.

d. One gains control over the entity, irrespective of the equity percentage owned.