Reply posts to two (2) classmates

Reply posts to two (2) classmates must be at least 100 words for each reply.

First classmate:

Don't use plagiarized sources. Get Your Custom Essay on
Reply posts to two (2) classmates
Get an essay WRITTEN FOR YOU, Plagiarism free, and by an EXPERT!
Order Essay

I believe Highland Laboratories should account for its investment in Abraham, Inc. using the equity method as the second accountant states. According to the text, “generally accepted accounting principles (GAAP) prescribes that the equity method should be used to account for Equity Investments when the investor has the ability to exercise ‘significant influence’ over operating and financial policies of an investee.” (Hopkins & Halsey, Page 5) The criteria regarding if the investor has significant influence in the company is simple. Since Highland Laboratories has more than twenty percent of the shares, they have significant influence since not stated otherwise by the investee. Highland Laboratories does not help manage and operate the company in any way, but it seems to me that they could exercise that right if they desired. As long as the investee does not challenge the investor’s ability to participate and exercise significant influence, or make an agreement regarding the investor’s significant influence, Highland Laboratories has that right to exercise its influence. Since the investor, Highland Laboratories, can exercise significant influence over Abraham, Inc.’s company, Highland Laboratories should account for the investment using the equity method. I agree with the second accountant’s statement suggesting that we certainly have the ability to exercise significant influence whether the company uses it or not. This means that according to generally accepted accounting principles, Highland Laboratories must account for the investment using the equity method. Even though Highland Laboratories does not know anything about running a bakery and Abraham, Inc. will not expect them to participate in decision-making or operations regarding the company’s business, Highland Laboratories certainly has a vote in how to run the business if they desired. This does not mean that Highland Laboratories is required to participate in operations and decision-making of Abraham, Inc., but Highland Laboratories is definitely allowed to participate if they decide they want to become more involved. There are ways that Abraham, Inc. could possibly keep Highland Laboratories from participating, but it all depends on the circumstances.

Second Classmate:

From the information that is given, I would say that this case does not qualify for the equity method. Going off what the first account said, there seems to be a lack of significant influence. There seems to be no representation on the board, there does not seem to be a strong inter-company transactions or dependency on the investor. It is important to note that even though Highland owns one third of all the stocks available for Abraham, Inc, it does not guarantee to qualify for the equity method. “The investor might not have significant influence even though it owns more than 20 percent of the outstanding voting stock of the investee” (Hopkins and Halsey). This quote shows that the second accountant is wrong in his argument. The important factor in determining if an investment qualifies for the equity method is the. Significant influence that Highland has on Abraham, Inc. Even when the percentage of the stock owned is less than the magic number of 20 percent, if the investor has a significant influence it can still qualifies for the equity method. So, I have to agree with the first accountant that this investment should be used at fair value method. With this method, the investment is reported on the balance sheet at the current value. It is important that the investment is reported to the current fair value every statement date. Any gain that is reported at the statement date is recorded in the current income. Any dividends received are reported as income. When an investment reported at fair value, this means that the investor cannot apply significant influence on the investee, in this case Highland does not have significant influence on Abraham, Inc.

The Homework Market
Order NOW For A 10% Discount!
Pages (550 words)
Approximate price: -

Why Choose Us

Top quality papers

We always make sure that writers follow all your instructions precisely. You can choose your academic level: high school, college/university or professional, and we will assign a writer who has a respective degree.

Professional academic writers

We have hired a team of professional writers experienced in academic and business writing. Most of them are native speakers and PhD holders able to take care of any assignment you need help with.

Free revisions

If you feel that we missed something, send the order for a free revision. You will have 10 days to send the order for revision after you receive the final paper. You can either do it on your own after signing in to your personal account or by contacting our support.

On-time delivery

All papers are always delivered on time. In case we need more time to master your paper, we may contact you regarding the deadline extension. In case you cannot provide us with more time, a 100% refund is guaranteed.

Original & confidential

We use several checkers to make sure all papers are plagiarism-free and do not share them with third parties.

24/7 Customer Support

Our support agents are available 24 hours a day 7 days a week and committed to providing you with the best customer experience. Get in touch whenever you need any assistance.

Try it now!

Calculate the price of your order

We'll send you the first draft for approval by at
Total price:
$0.00

How it works?

Follow these simple steps to get your paper done

Place your order

Fill in the order form and provide all details of your assignment.

Proceed with the payment

Choose the payment system that suits you most.

Receive the final file

Once your paper is ready, we will email it to you.

Our Services

No need to work on your paper at night. Sleep tight, we will cover your back. We offer all kinds of writing services.

Essays

Essay Writing Service

You are welcome to choose your academic level and the type of your paper. Our academic experts will gladly help you with essays, case studies, research papers and other assignments.

Admissions

Admission help & business writing

You can be positive that we will be here 24/7 to help you get accepted to the Master’s program at the TOP-universities or help you get a well-paid position.

Reviews

Editing your paper

Our academic writers and editors will help you submit a well-structured and organized paper just on time. We will ensure that your final paper is of the highest quality and absolutely free of mistakes.

Reviews

Editing your paper

Our academic writers and editors will help you submit a well-structured and organized paper just on time. We will ensure that your final paper is of the highest quality and absolutely free of mistakes.