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C2-1 Choice of Accounting Method Slanted Building Supplies

Resolved Question:

Choice of Accounting Method
Slanted Building Supplies purchased 32 percent of the voting shares of Flat Flooring Company
in March 20X3. On December 31, 20X3, the officers of Slanted Building Supplies indicated they
needed advice on whether to use the equity method or cost method in reporting their ownership in
Flat Flooring.
a. What factors should be considered in determining whether equity-method reporting is appropriate?
b. Which of the two methods is likely to show the larger reported contribution to Slanted’s earnings
in 20X4? Explain.
c. Why might the use of the equity method become more appropriate as the percentage of ownership
Submitted: 5 years ago.
Category: Homework
Expert:  Manal Elkhoshkhany replied 5 years ago.

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