v
| Multiple Choice Question 49 |
|
Reed Company acquires 80 Holmes 10%, 5 year, $1,000 bonds on January 1, 2012 for $82,000. This includes a brokerage commission of $2,000. The journal entry to record this investment includes a debit to
|
Stock Investments for $80,000. |
|
Debt Investments for $80,000. |
|
Debt Investments for $82,000. |
| Multiple Choice Question 51 |
|
|
|
|
|
Reed Company acquires 80 Holmes 10%, 5 year, $1,000 bonds on January 1, 2012 for $82,000. This includes a brokerage commission of $2,000. If Reed sells all of its Holmes Bonds for $83,200 and pays $2,400 in brokerage commissions, what gain or loss is recognized?
|
Gain of $4,800 |
| Multiple Choice Question 54 |
|
|
|
|
On January 1, 2012, the Borth Company purchased at face value, a $1,000, 6%, bond that pays interest on January 1 and July 1. Borth Company has a calendar year end. The adjusting entry on December 31, 2012, is
|
| Interest Receivable |
30 |
|
| Debt Investments |
|
30 |
|
|
| Cash |
30 |
|
| Interest Revenue |
|
30 |
|
|
| Interest Receivable |
30 |
|
| Interest Revenue |
|
30 |
|
| Multiple Choice Question 75 |
|
On August 1, Dogwood Company buys 2,000 shares of XYZ common stock for $60,000 cash plus brokerage fees of $1,200. On December 1, the stock investments are sold for $76,000 in cash. Which of the following are the correct journal entries of record for the purchase and sale of the common stock?
|
| Aug. 1 |
Cash |
61,200 |
|
|
Stock Investments |
|
61,200 |
| Dec. 1 |
Stock Investment |
76,000 |
|
|
Cash |
|
61,200 |
|
Gain on Sale of Stock Investments |
|
14,800 |
|
|
| Aug. 1 |
Cash |
61,200 |
|
|
Stock Investments |
|
61,200 |
| Dec. 1 |
Cash |
76,000 |
|
|
Stock Investments |
|
61,200 |
|
Gain on Sale of Stock Investments |
|
14,800 |
|
|
| Aug. 1 |
Stock Investments |
61,200 |
|
|
Cash |
|
61,200 |
| Dec. 1 |
Stock Investment |
76,000 |
|
|
Cash |
|
61,200 |
|
Gain on Sale of Stock Investments |
|
14,800 |
|
|
| Aug. 1 |
Stock Investments |
61,200 |
|
|
Cash |
|
61,200 |
| Dec. 1 |
Cash |
76,000 |
|
|
Stock Investments |
|
61,200 |
|
Gain on Sale of Stock Investments |
|
14,800 |
|
Multiple Choice Question 76 |
|
Lanier Industries owns 45% of McCoy Company. For the current year, McCoy 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 Lanier’s equity in McCoy’s net income and the receipt of dividends from McCoy?
|
| Dec. 31 |
Stock Investments |
112,500 |
|
|
Revenue from Investment in McCoy Company |
|
112,500 |
| Dec. 31 |
Cash |
60,000 |
|
|
Stock Investments |
|
60,000 |
|
|
| Dec. 31 |
Revenue from Investment in McCoy Company |
112,500 |
|
|
Stock Investments |
|
112,500 |
| Dec. 31 |
Stock Investments |
27,000 |
|
|
Cash |
|
27,500 |
|
|
| Dec. 31 |
Stock Investments |
85,500 |
|
|
Revenue from Investment in McCoy Company |
|
85,500 |
|
|
| Dec. 31 |
Stock Investments |
112,500 |
|
|
Revenue from Investment in McCoy Company |
|
112,500 |
| Dec. 31 |
Cash |
27,000 |
|
|
Stock Investments |
|
27,000 |
|
| Multiple Choice Question 77 |
|
|
|
|
|
On January 1, 2012, Bartley Corp. paid $1,200,000 for 100,000 shares of Oak Company’s common stock, which represents 40% of Oak’s outstanding common stock. Oak reported income of $300,000 and paid cash dividends of $90,000 during 2012 Bartley should report the investment in Oak Company on its December 31, 2012, balance sheet at
|
$1,116,000 |
| Multiple Choice Question 83 |
|
|
|
|
Terrell Corporation makes an investment in 200 shares of Simpson Company’s common stock. The stock is purchased for $50 a share plus brokerage fees of $800. The entry for the purchase is:
|
| Stock Investments |
10,000 |
|
| Cash |
|
10,000 |
|
|
| Debt Investments |
10,000 |
|
| Cash |
|
10,000 |
|
|
| Stock Investments |
10,800 |
|
| Cash |
|
10,800 |
|
|
| Stock Investments |
10,000 |
|
| Brokerage Fee Expense |
800 |
|
| Cash |
|
10,800 |
|
| Multiple Choice Question 85 |
|
|
|
|
|
For accounting purposes, the method used to account for investments in common stock is determined by
|
whether the stock has paid dividends in past years. |
|
whether the acquisition of the stock by the investor was “friendly” or “hostile.” |
|
the amount paid for the stock by the investor. |
|
the extent of an investor’s influence over the operating and financial affairs of the investee. |
| Multiple Choice Question 86 |
|
|
|
|
|
Hamilton Corporation sells 200 shares of common stock being held as an investment. The shares were acquired six months ago at a cost of $40 a share. Hamilton sold the shares for $45 a share. The entry to record the sale is
|
| Cash |
9,000 |
|
| Gain on Sale of Stock Investments |
|
1,000 |
| Stock Investments |
|
8,000 |
|
|
| Stock Investments |
8,000 |
|
| Loss on Sale of Stock Investments |
1,000 |
|
| Cash |
|
9,000 |
|
|
| Cash |
9,000 |
|
| Stock Investments |
|
9,000 |
|
|
| Cash |
8,000 |
|
| Loss on Sale of Stock Investments |
1,000 |
|
| Stock Investments |
|
9,000 |
|
| Multiple Choice Question 96 |
|
|
|
|
|
Under the cost method of accounting for dividends
|
Investment Revenue is credited when dividends are received. |
|
the Investment account is credited when the investee reports a net income. |
|
the Investment account is credited when dividends are received. |
|
Investment Revenue is credited when the investee reports a net income. |
| Multiple Choice Question 107 |
|
|
|
|
|
Hagan Company owns 10% interest in the stock of Nelsen Corporation. During the year, Nelsen pays $80,000 in dividends to Hagan, and reports $400,000 in net income. Hagan Company’s investment in Nelsen will increase Hagan net income by
|
$8,000. |
| Multiple Choice Question 120 |
|
|
|
|
If a stock investment is sold at a gain, the gain
|
is reported in the Other Revenue and Gain section of the income statement. |
|
contributes to gross profit on the income statement. |
|
is reported under a special section, “Discontinued investments,” on the income statement. |
|
is reported as operating revenue. |
| Multiple Choice Question 131 |
|
|
|
|
|
When a company owns more than 50% of the common stock of another company
|
they recognize revenue when dividends are received. |
|
consolidated financial statements are usually prepared. |
|
they are referred to as the subsidiary. |
|
the cost method of accounting is used. |
| Multiple Choice Question 132 |
|
|
|
|
|
The company whose stock is owned by the parent company is called the
|
subsidiary company. |
| Multiple Choice Question 137 |
|
|
|
|
In recognizing a decline in the fair value of short-term stock investments, an Unrealized Loss account is debited because
|
management intends to realize this loss in the near future. |
|
the securities have not been sold. |
|
the stock market is volatile. |
|
management cannot determine the exact amount of the loss in value. |
| Multiple Choice Question 140 |
|
|
|
|
|
At the end of the first year of operations, the total cost of the trading securities portfolio is $180,000 and the total fair value is $174,000. What should the financial statements show?
|
A reduction of an asset of $6,000 and an unrealized loss of $6,000 in the stockholders’ equity section. |
|
A reduction of an asset of $6,000 in the current assets section and an unrealized loss of $6,000 under “Other expenses and losses.” |
|
A reduction of an asset of $6,000 and a realized loss of $6,000. |
|
A reduction of an asset of $6,000 in the current assets section and a realized loss of $6,000 under “Other expenses and losses.” |
| Multiple Choice Question 148 |
|
|
|
|
|
Which of the following would not be reported under “Other Revenues and Gains” on the income statement?
|
Gain on sale of debt investments. |
|
Unrealized gain on available-for-sale securities. |
|
Dividend revenue. |
| Multiple Choice Question 149 |
|
|
|
|
If the cost of an available-for-sale security exceeds its fair value by $40,000, the entry to recognize the loss
|
will show a credit to a valuation allowance account that appears in the stockholders’ equity section of the balance sheet. |
|
will show a debit to an unrealized loss account that is deducted in the stockholders’ equity section of the balance sheet. |
|
is not required since the share prices will likely rebound in the long run. |
|
will show a debit to an expense account. |
| Multiple Choice Question 159 |
|
|
|
|
|
At December 31, 2012, the trading securities for Mayfair, Inc. are as follow
|
|
Fair Value |
| Security |
Cost |
12/31/12 |
| X |
$90,000 |
$92,000 |
| Y |
150,000 |
142,000 |
| Z |
32,000 |
28,000 |
Mayfair should report the following amount related to the securities transactions in its 2012 income statement
Appendix-E-qu….docx