True and False:
Journal entry
4.Big company receives $500 in dividends from Little. Assume Big has made no prior entry to create a receivable, and Big accounts for Little using the equity method of accounting. (3 points)
5.Same as question # 4, but Big uses the fair value method of accounting for its investment in Little.
6.Same as question # 4, but Big uses the cost method of accounting for Little.
4. The equity method is a type of accounting used for intercorporate investments. This method is used when the investor holds significant influence over the investee but does not exercise full control over it
Securities available for sale A/c Dr $500
To Cash A/C $500
5. The Fair value method is a type of accounting used when a company is holding less than 20% in other company
Investment in Little A/c Dr $500
To Cash A/C $500
6.The cost method is a type of accounting used for investments. This method is used when the investor exerts little or no influence over the investment that it owns
Investment in Little A/c Dr $500
To Cash A/C $500
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