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ACC 557_Quiz




Question;ACC 557Wise Company owns 30% interest in the stock of Dark Corporation. During the year, Dark pays $20,000 in dividends to Wise, and reports $200,000 in net income. Wise Company's investment in Dark will increase Wise's net income byOn January 1, 2013, Audrey Corp. paid $800,000 for 100,000 shares of Off Company's common stock, which represents 40% of Off's outstanding common stock. Off reported net income of $200,000 and paid cash dividends of $60,000 during 2013. Audrey should report the investment in Off Company on its December 31, 2013, balance sheet at:$856,000$824,000$800,000$744,000Corporations invest in other companies for all of the following reasons except togenerate strategic goals.increase trading of the other companies' excess cash until needed.1) Dayton Corporation purchased 1,000 shares of Kart common stock at $77 per share plus $2,000 brokerage fees as a short-term investment. The shares were subsequently sold at $80 per share less $3,400 brokerage fees. The cost of the securities purchased and gain or loss on the sale wereCostGain or Loss $79,000$2,400 loss $77,000$1,400 loss $77,000$3,000 gain $79,000$2,000 gain2) The company whose stock is owned by the parent company is called thesibling company.controlled company.subsidiary company.investee company.3) Debt investments that are held to maturity are recorded atfair value.maturity value.original cost.amortized cost.4) The balance sheet presentation of an unrealized loss on a non-trading security is similar to the statement presentation ofdiscount on bonds payable.treasury stock.allowance for doubtful accounts.prepaid expenses.5) An unrealized loss on non-trading securities isreported under Other Expenses and Losses in the income statement.reported as a separate component of stockholders' equity.deducted from the cost of the investment.closed-out at the end of the accounting period6) The equity method of accounting for an investment in the common stock of another company should be used by the investor when the investmentenables the investor to exercise significant influence over the obtained by an exchange of stock for stock.ensures a source of supply of raw materials for the composed of common stock and it is the investor's intent to vote the common stock7) On January 1, 2013, Danner Company purchased at face value, a $1,000, 8% bond that pays interest on January 1 and July 1. Danner Company has a calendar year end. The entry for the receipt of interest on July 1, 2013, isCash80Interest Revenue80Interest Receivable80Interest Revenue80Cash40Interest Revenue40Interest Receivable40Interest Revenue408) If a company acquires a 40% common stock interest in another company,the equity method is usually applicable.all influence is classified as controlling.the cost method is usually applicable.the ability to exert significant influence over the activities of the investee does not exist.9) If a short-term debt investment is sold, the Investment account isdebited for the cost of the bonds at the sale date.credited for the cost of the bonds at the sale date.credited for the face value of the bonds at the sale date.credited for the fair value of the bonds at the sale date.10) Cost and fair value data for the trading securities of Carson Company at December 31, 2013, are $115,000 and $85,000, respectively. Which of the following correctly presents the adjusting journal entry to record the securities at fair value?Dec. 31Unrealized Loss - Income30,000Trading Securities30,000Dec. 31Fair Value Adjustment - Trading30,000Unrealized Gain - Income30,000Dec. 31Unrealized Gain - Income30,000Trading Securities30,000Dec. 31Unrealized Loss - Income30,000Fair Value Adjustment - Trading30,00011) Nadia Corp. has common stock of $5,500,000, retained earnings of $3,000,000, unrealized gains on trading securities of $100,000 and unrealized losses on non-trading securities of $200,000. What is the total amount of its stockholders' equity?$8,600,000$8,300,000$8,500,000$8,400,00012) On January 1, Talent Company purchased as a short-term investment a $1,000, 8% bond for $1,050. The bond pays interest on January 1 and July 1. The bond is sold on October 1 for $1,200 plus accrued interest. Interest has not been accrued since the last interest payment date. What is the entry to record the cash proceeds at the time the bond is sold?Cash1,200Debt Investments1,200Cash1,200Debt Investments1,050Gain on Sale of Debt Investments150Cash1,220Debt Investments1,050Gain on Sale of Debt Investments150Interest Revenue20Cash1,220Debt Investments1,200Interest Revenue2013) Temper Co. purchased 60, 6% Irick Company bonds for $60,000 cash plus brokerage fees of $600. Interest is payable semiannually on July 1 and January 1. If 30 of the securities are sold on July 1 for $32,000 less $300 brokerage fees, the entry would include a credit to Gain on Sale of Debt Investments for$2,000.$1,700.$1,400.$2,300.14) If the cost method is used to account for a long-term investment in common stock,it is presumed that the investor has significant influence on the investee.the Investment account may be, at times, greater than the acquisition cost.the earning of net income by the investee is considered a proper basis for recognition of income by the income of the investee is not considered earned by the investor until dividends are declared by the investee.15) When bonds are sold, the gain or loss on sale is the difference between thesales price and the cost of the proceeds and the cost of the bonds.sales price and the fair value of the proceeds and the fair value of the bonds


Paper#38253 | Written in 18-Jul-2015

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