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答案和详解如下：

Q48. Joseph Haggs, CFA, is an analyst working for Garvess Jones, a large publicly traded investment-baking firm. Haggs covers

     the Internet sector. Recently, one of the more successful companies Haggs covers, Simpson Corporation, made an

     aggressive move to acquire another Internet company, Bailey Corporation (BC). BC is a company specializing in graphics and

     animation on the World Wide Web and has 1,000,000 shares outstanding. Simpson also holds minimal investments in other

     technology companies both public and private. In 1999 Simpson saw an opportunity to substantially increase its share in BC.

     Simpson feels that their sophisticated animation can greatly improve Simpson's market share and sees an acquisition as an

     opportunity to expand their business. The relevant financial data are in the following tables.

Bailey Corporation
Selected Financial Data, Years Ended December 31
(in Thousands)
< >>
Item	1998	1999	2000
Sales	$50,000	$60,000	$70,000
Less: cost of goods sold (COGS)	37,000	43,700	47,250
Earnings before interest & taxes (EBIT)	13,000	16,300	22,750
Less: Interest	10,000	13,000	19,000
EBT	3,000	3,300	3,750
Less: Taxes	1,000	1,100	1,250
Net Income	$2,000	$2,200	$2,500
Dividends Paid	$1,000	$1,200	$1,500
Total Shares Outstanding	1,000,000

 

Simpson’s Purchase Transactions in BC’s Stock
Date	January 1, 1998	January 1, 1999	January 1, 2000
Number of Shares	10,000	290,000	700,000
Price per Share	10	11	15

Because this is the largest acquisition in Simpson's history, Mr. Haggs' supervisor has asked him to prepare a report for Garvess Jones' clients detailing the affects of the acquisition on Simpson's financial statements.

Haggs wonders which accounting method Simpson uses to calculate the book value of the BC investment for the year ending December 31, 1999. Which is the correct method?

A)   Equity method.

B)   Consolidation method.

C)   Cost method.

Correct answer is A)

When a company owns an influential but non-controlling interest in another company, commonly 20-50%, it must account for it under the equity method.

Q49. Haggs wonders which accounting method Simpson uses to calculate the book value of the BC investment for the

     year ending December 31, 1998. Which is the correct method?

A)   Cost method.

B)   Equity method.

C)   Consolidation method.

Correct answer is A)

When a company owns a non-influential and non-controlling interest in another company the investment must be carried at cost. Simpson must carry its BC investment at cost for 1998.

Q50. Haggs wonders which accounting method Simpson uses to calculate the book value of the BC investment for the

     year ending December 31, 2000. Which is the correct method?

A)   Equity method.

B)   Consolidated method.

C)   Pooling-of-interests method.

Correct answer is B)

When a company's interest in another exceeds 50% it is considered to have controlling interest and must consolidate the financial statements.