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Basic Question 6 of 6
If Investor company, by issuing new stocks, acquires a 30% interest in Investee company at book value, under the proportionate consolidation method, Investor Company will report total assets of
A. $20,500.
B. $19,000.
C. $24,000.
User Contributed Comments 7
| User | Comment |
|---|---|
| robbe1 | If the stake is bought with cash, total assets stays at $19k. |
| turtle | exactly :-) |
| raner | why? will the CA(Cur Asset) account be reduced by the cash paid out? |
| katybo | I think so |
| ilzina | if investor company obtains additional funds by issuing new shares, the assets of investor go up by 1k. so 20k -1k (payment) + 30% x5k = 20.5k |
| kodali | Good Comment Robbie |
| davidt876 | no don't encourage him! he's wrong! |
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Learning Outcome Statements
describe the classification, measurement, and disclosure under International Financial Reporting Standards (IFRS) for 1) investments in financial assets, 2) investments in associates, 3) joint ventures, 4) business combinations, and 5) special purpose and variable interest entities;
distinguish between IFRS and US GAAP in their classification, measurement, and disclosure of investments in financial assets, investments in associates, joint ventures, business combinations, and special purpose and variable interest entities;
analyze how different methods used to account for intercorporate investments affect financial statements and ratios.
CFA® 2025 Level II Curriculum, Volume 2, Module 10.