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Acct 557 Chapter 12 quiz

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Question;Acct 557 Chapter 12 quizMultiple Choice Question 92On 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$744,000$824,000$800,000Multiple Choice Question 90On August 1, Mistery Company buys 2,000 shares of ABC common stock for $70,000 cash plus brokerage fees of $2,200. On December 1, the stock investments are sold for $76,000 in cash. Which of the following are the correct journal entries to record for the purchase and sale of the common stock? Aug. 1 Cash 72,200 Stock Investments 72,200Dec. 1 Cash 76,000 Stock Investments 72,200 Gain on Sale of Stock Investments 3,800 Aug. 1 Stock Investments 72,200 Cash 72,200Dec. 1 Stock Investments 76,000 Cash 72,200 Gain on Sale of Stock Investments 3,800 Aug. 1 Stock Investments 72,200 Cash 72,200Dec. 1 Cash 76,000 Stock Investments 72,200 Gain on Sale of Stock Investments 3,800 Aug. 1 Cash 72,200 Stock Investments 72,200Dec. 1 Stock Investments 76,000 Cash 72,200 Gain on Sale of Stock Investments 3,800Multiple Choice Question 91Laramie industries owns 45% of McCook Company. For the current year, McCook reports net income of $250,000 and declares and pays a $60,000 cash dividend. Which of the following correctly presents the journal entries to record Laramie's equity in McCook's net income and the receipt of dividends from McCook? Dec. 31 Revenue from Stock Investments 112,500 Stock Investments 112,500Dec. 31 Stock Investments 27,000 Cash 27,000 Dec. 31 Stock Investments 85,500 Revenue from Stock Investments 85,500 Dec. 31 Stock Investments 112,500 Revenue from Stock Investments 112,500Dec. 31 Cash 27,000 Stock Investments 27,000 Dec. 31 Stock Investments 112,500 Revenue from Stock Investments 112,500Dec. 31 Cash 60,000 Stock Investments 60,000Multiple Choice Question 60Tan Company had these transactions pertaining to stock investments:Feb. 1 Purchased 3,000 shares of Norton Company (10%) for $49,800 cash plus brokerage fees of $1,200. June 1 Received cash dividends of $3 per share on Norton stock.Oct. 1 Sold 1,200 shares of Norton stock for $24,000 less brokerage fees of $600.The entry to record the receipt of the dividends on June 1 would include a debit to Stock Investments for $9,000.credit to Dividend Revenue for $9,000.credit to Stock Investments for $9,000.debit to Dividend Revenue for $9,000.Multiple Choice Question 78Under the equity method, the Stock Investments account is increased when the stock investment is sold at a gain.investee company pays a dividend.investee company reports net income.investee company reports a loss.Multiple Choice Question 125Gorman Corporation has the following trading portfolio of stock investments as of December 31, 2013.Security Cost Fair ValueA $21,000 $ 19,000B 19,000 25,000C 37,000 31,000 $77,000 $75,000On January 22, 2014, Gorman Corporation sold security C for $32,000. Assuming that Gorman made the proper adjustments when closing its books on December 31, 2013, the journal entry for the 2014 sale would include a credit to Fair Value Adjustment?Trading for $32,000.credit to Unrealized Gain?Income for $1,000.debit to Unrealized Loss?Income for $5,000.debit to Loss on Sale of Stock Investments for $5,000.Multiple Choice Question 99A company that owns more than 50% of the common stock of another company is known as the parent company.subsidiary company.management company.charge company.Multiple Choice Question 37A typical investment to house excess cash until needed is stocks of companies in a related industry.debt securities.low-risk, highly liquid securities.stock securities.Multiple Choice Question 146Securities bought and held primarily for sale in the near term to generate income on short-term price differences are non-trading securities.trading securities.never-sell securities.held-for-collection securities.Multiple Choice Question 81Revenue is recognized when cash dividends are received under the controlling interest method.both the cost and equity methods.the cost method.the equity method.Multiple Choice Question 130Which one of the following would not be classified as a short-term investment? Short-term paperMarketable stock securitiesEquity method investmentsMarketable debt securitiesMultiple Choice Question 85If a company acquires a 40% common stock interest in another company, the ability to exert significant influence over the activities of the investee does not exist.all influence is classified as controlling.the cost method is usually applicable.the equity method is usually applicable.Multiple Choice Question 118At the end of the first year of operations, the total cost of the trading securities portfolio is $244,000. Total fair value is $250,000. The financial statements should show an addition to an asset of $6,000 and an unrealized gain of $6,000 in the stockholders' equity section.an addition to an asset of $6,000 in the current assets section and a realized gain of $6,000 in ?Other revenues and gains.?an addition to an asset of $6,000 and a realized gain of $6,000.an addition to an asset of $6,000 in the current assets section and an unrealized gain of $6,000 in ?Other revenues and gains.?Multiple Choice Question 113The balance in the Unrealized Loss?Equity account will appear on the balance sheet as a contra asset.appear as a deduction in the stockholders' equity section.appear on the income statement under Other Expenses and Losses.not be shown on the financial statements until the securities are soldMultiple Choice Question 63Nickel Company owns 30% interest in the stock of Finn Corporation. During the year, Finn pays $25,000 in dividends, and reports $200,000 in net income. Nickel Company's investment in Finn will increase by $52,500.$25,000.$67,500.$60,000.

 

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