Exam (elaborations)
Test Bank for Advanced Accounting 12th Edition by Joe Ben Hoyle
- Course
- Institution
Test Bank for Advanced Accounting 12th Edition by Joe Ben Hoyle Complete and Comprehensive Guide.
[Show more]
Seller
Follow
QuizMerchant
Reviews received
Content preview
Test Bank for AdvancedAccounting 12th Edition by
Joe Ben Hoyle, Thomas
Schaefer, Timothy Doupnik
et al.
Complete and Comprehensive Guide
,Chapter 01; The Equity Method of Accounting for Investments
Multiple Choice Questions
1. Gaw Company owns 15% of the common stock of Trace Corporation and used the fair-value
method to account for this investment. Trace reported net income of $110,000 for 2013 and paid
dividends of $60,000 on October 1, 2013. How much income should Gaw recognize on this
investment in 2013?
A. $16,500.
B. $9,000.
C. $25,500.
D. $7,500.
E. $50,000.
1-2
.
,2. Yaro Company owns 30% of the common stock of Dew Co. and uses the equity method to
account for the investment. During 2013, Dew reported income of $250,000 and paid dividends of
$80,000. There is no amortization associated with the investment. During 2013, how much income
should Yaro recognize related to this investment?
A. $24,000.
B. $75,000.
C. $99,000.
D. $51,000.
E. $80,000.
3. On January 1, 2013, Pacer Company paid $1,920,000 for 60,000 shares of Lennon Co.'s voting
common stock which represents a 45% investment. No allocation to goodwill or other specific
account was made. Significant influence over Lennon was achieved by this acquisition. Lennon
distributed a dividend of $2.50 per share during 2013 and reported net income of $670,000. What
was the balance in the Investment in Lennon Co. account found in the financial records of Pacer
as of December 31, 2013?
A. $2,040,500.
B. $2,212,500.
C. $2,260,500.
D. $2,171,500.
E. $2,071,500.
1-3
.
, 4. A company should always use the equity method to account for an investment if:
A. It has the ability to exercise significant influence over the operating policies of the investee.
B. It owns 30% of another company's stock.
C. It has a controlling interest (more than 50%) of another company's stock.
D. The investment was made primarily 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.
5. On January 1, 2011, Dermot Company purchased 15% of the voting common stock of Horne
Corp. On January 1, 2013, Dermot purchased 28% of Horne's voting common stock. If Dermot
achieves significant influence with this new investment, how must Dermot account for the change
to the equity method?
A. It must use the equity method for 2013 but should make no changes in its financial statements
for 2012 and 2011.
B. It should prepare consolidated financial statements for 2013.
C. It must restate the financial statements for 2012 and 2011 as if the equity method had been
used for those two years.
D. It should record a prior period adjustment at the beginning of 2013 but should not restate the
financial statements for 2012 and 2011.
E. It must restate the financial statements for 2012 as if the equity method had been used then.
1-4
.
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller QuizMerchant. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $18.99. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
78252 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy study notes for 14 years now