Intermediate Accounting Assignment
1) The Nail Company paid $1,200,000 to purchase 35% of the outstanding stock of the Toe Corporation. Toe Corporation reports $450,000 of net income and paid a cash dividend of $150,000. These three events will increase Nail Company's Investment account from $0 to:
A) $600,000 B) $1,410,000 C) $1,305,000 D) $420,000
2) A controlling interest exists when the investor:
A) owns more than 50% of the investee's voting stock
B) uses the equity method to account for the investment
C) uses the market value method of accounting for the investment
D) owns more than 20% of the investee's voting stock
3) The Allowance to Adjust Investment to Market account has a current debit balance of $850. Available-for-sale investments with a cost of $10,000 have a current market value of $12,300. The adjusting entry will require a:
A) credit to Allowance to Adjust Investment to Market for $3,150
B) credit to Allowance to Adjust Investment to Market for $1,450
C) debit to Allowance to Adjust Investment to Market for $1,450
D) debit to Allowance to Adjust Investment to Market for $2,300
4) The Allowance to Adjust Investment to Market account has a current credit balance of $812. Available-for-sale investments with a cost of $22,000 have a current market value of $22,600. The adjusting entry will require a:
A) debit to Allowance to Adjust Investment to Market for $1,412
B) debit to Allowance to Adjust Investment to Market for $212
C) debit to Allowance to Adjust Investment to Market for $600
D) credit to Allowance to Adjust Investment to Market for $1,412
5) On January 1, 2006, Easy Corporation purchased 30% of the outstanding stock of Hard Corporation for $800,000. Net income reported by Hard Corporation for 2006 was $125,000. Dividends paid by Hard Corporation during 2006 were $75,000. The amount of investment revenue that Easy should recognize for 2006 is:
A) $22,500 B) $60,000 C) $15,000 D) $37,500
6) A gain or loss on the sale of a long-term investment using the equity method is determined by comparing the cash received with the:
A) lower-of-cost-or-market value of the long-term investment
B) market value of the long-term investment
C) cost of the long-term investment
D) cost of the long-term investment adjusted for the investor's share of the investee's net income and cash dividends while the investment was held by the investor company
7) Held-to-maturity investments are reported on the balance sheet at their:
A) par value or stated value B) current market value
C) amortized cost D) historical cost