| After studying this chapter, you should be able to: |
| LO1 | Describe in general the various methods of accounting for an investment in equity shares of another company.
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| LO2 | Identify the sole criterion for applying the equity method of accounting and guidance in assessing whether the criterion is met. |
| LO3 | Prepare basic equity method journal entries for an investor and describe the financial reporting for equity method investments.
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| LO4 | Allocate the cost of an equity method investment and compute amortization expense to match revenues recognized from the investment to the excess of investor cost over investee book value.
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| LO5 | Record the sale of an equity investment and identify the accounting method to be applied to any remaining shares that are subsequently held. |
| LO6 | Describe the rationale and computations to defer unrealized gross profits on intra-entity transfers until the goods are either consumed or sold to outside parties. |
| LO7 | Explain the rationale and reporting implications of the fair-value option for investments otherwise accounted for by the equity method. |
