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Web-Browser, a non-public company, is an application service provider. Web-Browser provides web-based, full-service employee benefits and eligibility administration to mid- sized companies and professional benefit plan administrators serving middle market clients.

In 1998, Web-Browser acquired a 15 percent limited partner interest in Internet Access Company (Internet Access), a limited partnership, for $100,000. Assume that Internet Access is not a variable interest entity and would not be accounted for under FIN 46(R), Consolidation of Variable Interest Entities.

In June 1999, Web-Browser acquired an additional 15 percent limited partner interest in Internet Access for $100,000 and loaned Internet Access $184,000 to support its ongoing operations. The $184,000 loan funded all of Internet Access' cash requirements for the previous six-month period and was treated by Web-Browser as an advance for accounting purposes.

Required:

• What method of accounting should Web-Browser use to account for its investment in Internet Access at December 31, 1998, and June 30, 1999 (i.e., cost or equity method)?

Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M942510

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