Cash flows and Cost/Equity/Consolidated Methods of Accounting

Brablo · 2007-02-01T01:27:10+00:00

1. Using the cost method of accounting (where less than 20% of acompany is owned), suppose the stocks and bonds of an acquired companyis bought. How is this classified (i.e. CFO, CFI, CFF)? I realizethat the dividends and interest received are CFO. Dividends andinterest paid by the acquiring company is simply the CFF and CFO,respectively.2. Using the equity method, how are dividends received as (CFO, orCFI)? Also, when the acquiring company purchases more than 20% of acompany, is this a CFI outflow?

Feb 01, 2007 0 Replies

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Using the cost method of accounting (where less than 20% of a company is owned), suppose the stocks and bonds of an acquired company is bought. How is this classified (i.e. CFO, CFI, CFF)? I realize that the dividends and interest received are CFO. Dividends and interest paid by the acquiring company is simply the CFF and CFO, respectively.

Using the equity method, how are dividends received as (CFO, or CFI)? Also, when the acquiring company purchases more than 20% of a company, is this a CFI outflow?

Cash flows and Cost/Equity/Consolidated Methods of Accounting

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