Cash flows and Cost/Equity/Consolidated Methods of Accounting


B

Brablo

1. 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.

2. 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?
 
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