ACCTG 473 Lecture Notes - Lecture 9: Equity Method
Get access
Related Documents
Related Questions
Can someone please help me with the following questions so I candouble check my work? No explanation needed just the answer isfine.
8. U.S. GAAP and IFRS require firms to account for minority,active investments, generally those where the investor owns between_____ using the equity method. Under the equity method, theinvestor recognizes as revenue (expense) each period its share ofthe net income (loss) of the investee. The investor recognizesdividends received from the investee as a return (reduction) ofinvestment, not as income.
a. | 10% and 50% |
b. | 20% and 50% |
c. | 30% and 50% |
d. | 40% and 60% |
e. | 50% and 60% |
25. Purchaser Corporation acquires 30%of the outstanding voting common shares of the Investee Corporationfor $600,000. Purchaser Corporation acquires the investment inInvestee Corporation by buying previously issued shares of InvesteeCorporation from other investors. When Purchaser Corporationacquired 30% of Investee Corporationâs common shares for $600,000,Investee Corporationâs total shareholdersâ equity was $1.5 million.Purchaser Corporationâs cost exceeds the carrying value of the netassets acquired by $150,000 [ $600,000 - (0.30 x$1,500,000)].
Purchaser Corporation attributes the $150,000 excess purchaseprice as follows: $100,000 to remeasure buildings and equipment tofair value and $50,000 to goodwill. Which of the following is/aretrue?
a. | Purchaser Corporation does not reclassify this excess out of itsInvestment in Stock of Investee Corporation account to Buildingsand Equipment and to Goodwill. |
b. | Purchaser Corporation must amortize (or depreciate) any amountattributed to assets with limited lives. |
c. | Purchaser Corporation must depreciate the $100,000 attributed tobuildings and equipment over their remaining useful lives. |
d. | U.S. GAAP and IFRS do not permit the investor to amortize theexcess purchase price attributed to goodwill and other assets withindefinite lives. Instead, the investor must test the investmentaccount annually for possible impairment. |
e. | all of the above |
32. Pareto Corporation owns 40% ofSpring Corporation. During Year 3, Spring has net income of$60,000. What entry should Pareto record related to its investmentin Spring during Year 3?
a. | Investment in SpringCorp. 24,000 Equity in Earnings ofAffiliate 24,000 |
b. | DividendReceivable 24,000 DividendIncome 24,000 |
c. | InvestmentReceivable 24,000 InvestmentIncome 24,000 |
d. | Investment in SpringCorp. 24,000 InvestmentIncome 24,000 |
e. | Investment in SpringCorp. 24,000 Cash 24,000 |
35. Pense Co. purchased 40% of thestock of Stretch Co. in Year 1 for $100,000. Stretch had net incomein Year 1 of $50,000 and net income in Year 2 of $30,000. Stretchalso paid total dividends of $20,000 in Year 2. On January 1, Year3, Pense Co. sold its investment in Stretch Co. to GE CapitalCorporation (GE) for $130,000. What entry would Pense Co. make torecord the sale of Stretch Co.?
a. | Cash 130,000 Gain onSale 6,000 Investment inStretch 124,000 |
b. | Cash 130,000 Loss onSale 2,000 Investment inStretch 132,000 |
c. | Cash 130,000 Loss onSale 10,000 Investment inStretch 140,000 |
d. | Cash 130,000 Loss onSale 30,000 Investment inStretch 160,000 |
e. | Cash 130,000 Loss onSale 20,000 Investment inStretch 150,000 |
55. Intercompany sales
a. | do not need to be eliminated as long as the sales have beencompleted to an outside party. |
b. | must be eliminated from both the sales and cost of goods soldaccounts. |
c. | do not need to be eliminated if made at arm's length values. |
d. | must be eliminated only if not in the ordinary course of tradeor business. |
e. | do not need to be eliminated. |
54. To avoid double counting P'sinvestment in S, P must eliminate
a. | the investment in S and S's separate company shareholders'equity. |
b. | all debt on S's separate company financial statements. |
c. | any dividends paid against the cash account. |
d. | all intercompany transactions. |
e. | all of the above. |
58. U.S. GAAP view investments of over50 percent of the voting stock of another company (for the purposeof controlling the other company at the broad policy-making leveland at the day-to-day operational level) as
a. | minority, passive investments. |
b. | minority, active investments. |
c. | majority, passive investments. |
d. | majority, active investments. |
e. | marketable securities. |
33. If Wabasso Company pays $55,000 individends to its corporate investor Lament Corporation (Lament owns35% of The Wabasso Company), what entry should Lament Corporationrecord when it receives the dividends?
a. | Cash 55,000 DividendIncome 55,000 |
b. | Cash 55,000 InvestmentIncome 55,000 |
c. | Cash 55,000 Investment in WabassoCompany 55,000 |
d. | Cash 55,000 Additional Paid-inCapital 55,000 |
e. | Cash 55,000 Common Stock- WabassoCompany 55,000 |
25. Purchaser Corporation acquires 30%of the outstanding voting common shares of the Investee Corporationfor $600,000. Purchaser Corporation acquires the investment inInvestee Corporation by buying previously issued shares of InvesteeCorporation from other investors. When Purchaser Corporationacquired 30% of Investee Corporationâs common shares for $600,000,Investee Corporationâs total shareholdersâ equity was $1.5 million.Purchaser Corporationâs cost exceeds the carrying value of the netassets acquired by $150,000 [ $600,000 - (0.30 x$1,500,000)].
Purchaser Corporation attributes the $150,000 excess purchaseprice as follows: $100,000 to remeasure buildings and equipment tofair value and $50,000 to goodwill. Which of the following is/aretrue?
a. | Purchaser Corporation does not reclassify this excess out of itsInvestment in Stock of Investee Corporation account to Buildingsand Equipment and to Goodwill. |
b. | Purchaser Corporation must amortize (or depreciate) any amountattributed to assets with limited lives. |
c. | Purchaser Corporation must depreciate the $100,000 attributed tobuildings and equipment over their remaining useful lives. |
d. | U.S. GAAP and IFRS do not permit the investor to amortize theexcess purchase price attributed to goodwill and other assets withindefinite lives. Instead, the investor must test the investmentaccount annually for possible impairment. |
e. | all of the above |
20. Pagoli Corporation acquires 30% ofthe outstanding voting common shares of the Inform Corporation for$600,000. Pagoli Corporation acquires the investment in InformCorporation by buying previously issued shares of InformCorporation from other investors.
Between the time of the acquisition and the end of PagoliCorporationâs next accounting period, Inform Corporation reportsearnings of $80,000; and pays a dividend of $30,000 to holders ofits common stock.
Inform Corporation reports earnings of $100,000 and paysdividends of $40,000 during the subsequent accounting period.
Pagoli Corporationâs Investment in Stock of Inform Corporationaccount now has a balance of:
a. | $609,000 |
b. | $621,000 |
c. | $633,000 |
d. | $642,000 |
e. | $657,000 |
17 accounting 1 questions! HELP
9. The following amounts and costs of platters were availablefor sale by Corpus Christy Ceramics during 2016:
Beginning inventory | 10 units at $41 |
First purchase | 15 units at $55 |
Second purchase | 30 units at $70 |
Third purchase | 25 units at $65 |
Corpus Christy Ceramics has 35 platters on hand at the end ofthe year.
What is the dollar amount of inventory at the end of the yearaccording to the weighted-average cost method?
Select one:
A. $4,340
B. $9,920
C. $3,465
D. $6,200
32. Santa Fe Corporation uses the perpetual inventory method. OnMarch 1, it purchased $60,000 of merchandise inventory, terms 2/10,n/30. On March 3, Santa Fe returned goods (not damaged) that cost$6,000. On March 9, Santa Fe paid the supplier.
On March 9, Santa Fe should credit:
Select one:
A. Purchase discounts for $1,200
B. Purchase discounts for $1,080
C. Inventory for $1,080
D. Inventory for $1,200
33. Rocky Company has beginning equity of $600,000, net incomeof $100,000, dividends of $60,000 and investments by owners inexchange for stock of $20,000. Its ending equity is:
Select one:
A. $660,000
B. $480,000
C. $536,000
D. $446,000
35. On September 1, 2016, Chopper, Inc. reported RetainedEarnings of $272,000. During the month of September, Choppergenerated revenues of $40,000, incurred expenses of $24,000,purchased equipment for $10,000 and paid dividends of $12,000.
What is the balance in Retained Earnings on September 30,2016?
Select one:
A. $272,000 debit
B. $276,000 credit
C. $ 16,000 credit
D. $274,000 credit
36. Savannah Company purchases $120,000 of inventory during theperiod and sells $36,000 of it for $60,000. Beginning of the periodinventory was $6,000.
What is the companyâs inventory balance to be reported on itsbalance sheet at year end?
Select one:
A. $36,000
B. $90,000
C. $ 4,000
D. $ 6,000
37. Assuming rising prices, which method will give the highestdollar value for cost of goods sold on the income statement?
Select one:
A. FIFO
B. Average Cost
C. LIFO
D. All of these give equal values for cost of goods sold
38. Kali Company began the period with $20,000 in inventory. Thecompany also purchased an additional $20,000 of inventory andreturned $2,000 for a full credit. A physical count of theinventory at yearâend revealed an inventory on hand of $16,000.What was Kaliâs cost of goods sold for the period?
Select one:
a. $50,000
b. $22,000
c. $48,000
d. $16,000
39. The periodic inventory system differs from the perpetualinventory system:
Select one:
because the periodic system is not compatible with moderntechnology.
because the periodic system continually updates inventory, whilethe perpetual inventory system only updates inventory at the end ofthe period.
because the perpetual system continually updates inventory,while the periodic inventory system only updates inventory at theend of the period.
because the periodic system is more complex and costly.
40. Which one of the following is included in currentassets?
Select one:
A. Common stock
B. Accounts receivable
C. Taxes payable
D. Automobiles
41. For the balance sheet to be in balance, the following mustexist:
Select one:
Total assets must be less than total liabilities
Total assets must be greater than total liabilities
Total assets must equal total liabilities plus stockholders'equity
Total liabilities must equal total stockholders' equity
43. Using a perpetual inventory system, the buyerâs journalentry to record the freight costs includes a:
Select one:
A. Debit to Purchases
B. Debit to Inventory
C. Debit to Freight In
D. Debit to Cost of Goods Sold
44. Joshua records purchases at invoice price and uses theperpetual inventory system. On July 5, Joshua returned $6,000 ofgoods purchased on account to the seller.
How would Joshua record this transaction?
Select one:
A.
Accounts Payable | 6,000 | ||
Purchases | 6,000 | ||
B.
Accounts Receivable | 6,000 | ||
Inventory | 6,000 | ||
C.
Accounts Payable | 6,000 | ||
Inventory | 6,000 | ||
D.
Cash | 6,000 | ||
Purchases | 6,000 | ||
45. Smith & Sons purchased $5,000 of merchandise from theClaremont Company with terms of 3/10, n/30. How much discount isSmith & Sons entitled to take if it pays within the alloweddiscount period of 10 days?
Select one:
$100
$50
$300
$150
46. The accounting record for Max III Company reported thefollowing selected information:
Operating Expenses | $180,000 |
Sales Returns and Allowances | 52,000 |
Sales Discounts | 24,000 |
Sales Revenue | 700,000 |
Cost of Goods Sold | 268,000 |
Determine Max III Company's gross profit.
Select one:
A. $332,000
B. $280,000
C. $308,000
D. $356,000
48. Using a a perpetual inventory system, the sellerâs journalentry to record the payment for merchandise, received from thebuyer, within the discount period includes a:
Select one:
A. Debit to Accounts Receivable
B. Debit to Cost of Goods Sold
C. Credit to Sales Discounts
D. Debit to Sales Discounts
49.Geraldoâs Groceries purchased milk cartons at an invoiceprice of $6,000 and terms of 2/10, n/30. On arrival of the goods,Geraldoâs realized that half of the milk was past the expirationdate, and returned them immediately to the supplier.
If Geraldoâs pays the remaining amount of the invoice within thediscount period, the amount paid should be:
Select one:
A. $2,880
B. $5,880
C. $2,940
D. $6,000
50. Which one of the following is not a current liability?
Select one:
A. Wages payable
B. Accounts payable
C. Wage expense
D. Taxes payable