Adv Accounting Chapter 1

Chapter 01 The Equity Method of Accounting for Investments Multiple Choice Questions 1. Gaw inter-group communication owns 15% of the green stock of Trace Corporation and defend 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 gild owns 30% of the commonalty stock of Dew Co. and uses the beauteousness system to account for the investment. During 2008, Dew reported income of $250,000 and paying dividends of $80,000. There is no amortization associated with the investment. During 2008, how much income should Yaro recognize colligate 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 f or 60,000 shares of Lennon Co.s voting common stock which represents a 45% investment. No allocation to grace or other particular(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: ordinary 4. A company should always use the equity method to account for an investment if A. It has the ability to re! ckon significant acquiesce 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 unavoidableness to get a broad(a) essay, order it on our website: OrderCustomPaper.com

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