Adv Accounting Chapter 1

Chapter 01 The Equity Method of Accounting for Investments Multiple Choice Questions 1. Gaw affiliation owns 15% of the green stock of Trace Corporation and take to the fair-value mode to account for this enthronization funds. Trace reported light up income of $110,000 for 2008 and gainful dividends of $60,000 on October 1, 2008. How much income should Gaw recognize on this investment in 2008? A. $16,500 B. $9,000 C. $25,500 D. $7,500 E. $50,000 fuss: Easy 2. Yaro friendship owns 30% of the uncouth stock of Dew Co. and uses the beauteousness system to account for the investment. During 2008, Dew reported income of $250,000 and nonrecreational dividends of $80,000. There is no amortization associated with the investment. During 2008, how much income should Yaro recognize link up to this investment? A. $24,000 B. $75,000 C. $99,000 D. $51,000 E. $80,000 trouble: Easy 3. On January 1, 2008, Pacer Company paid $1,920,000 for 60,000 shares of Lennon Co.s voting common stock which represents a 45% investment. No allocation to grace or other peculiar(prenominal) account was made. Significant curve all over Lennon was achieved by this acquisition. Lennon distributed a dividend of $2.50 per share during 2008 and reported net income of $670,000. What was the balance in the Investment in Lennon Co.

account make up in the financial records of Pacer as of December 31, 2008? A. $2,040,500 B. $2,212,500 C. $2,260,500 D. $2,171,500 E. $2,071,500 Difficulty: mediocre 4. A company should always use the equity method to account f or an investment if A. It has the ability ! to practise significant influence over the operating policies of the investee B. It owns 30% of a nonher companys stock C. It has a overbearing interest (more than 50%) of another companys stock D. The investment was made earlier to earn a return on excess cash E. It does not have the ability to exercise significant influence over the operating policies of the investee Difficulty: Easy...If you wishing to get a broad(a) essay, order it on our website: OrderCustomPaper.com

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