Solutions and Test Bank For Fundamentals of Advanced Accounting 8th Edition By Joe Ben Hoyle

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01
MULTIPLEfCHOICEf-
fChoosefthefonefalternativefthatfbestfcompletesfthefstatementforfanswersfthefquestion.


1) BakerfCompanyfownsf15%foffthefcommonfstockfoffCharliefCorporationfandfusedftheffair
-
valuefmethodftofaccountfforfthisfinvestment.fCharliefreportedfnetfincomefoff$120,000fforf2021fan
dfpaidfdividendsfoff$70,000fonfOctoberf1,f2021.fHowfmuchfincomefshouldfBakerfrecognizefonfth
isfinvestmentfinf2021?
1)ff


A)f $18,000.
B)f $10,500.
C)f $28,500.
D)f $7,500.
E)f $50,000.



QuestionfDetails
Accessibilityf:fKeyboardfNavigationf
Bloom'sf:fApply
AICPAf:fBBfCriticalfThinkingf
AICPAf:fFNfMeasurement
LearningfObjectivef:f01-
02fDescribefinfgeneralfthefvariousfmethodsfoffaccountingfforfanfinvestmentfinfGradablef:fautomatic
Difficultyf:f3fHard
AACSBf:fKnowledgefApplicationfAccess
ibilityf:fScreenfReaderfCompatible
Topicf:fAccountingfforfInvestments―VariousfMethods



2) LoefflerfCompanyfownsf35%foffthefcommonfstockfoffTetterfCo.fandfusesfthefequityfmethodft
ofaccountfforfthefinvestment.fDuringf2021,fTetterfreportedfincomefoff$260,000fandfpaidfdividendsfoff
$90,000.fTherefisfnofamortizationfassociatedfwithfthefinvestment.fDuringf2021,fhowfmuchfincomefs
houldfLoefflerfrecognizefrelatedftofthisfinvestment?
2)ff


A)f $90,000.
B)f $91,000.
C)f $122,500.
D)f $31,500.
E)f $59,500.


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QuestionfDetails
Accessibilityf:fKeyboardfNavigationf
Bloom'sf:fApply
AICPAf:fBBfCriticalfThinkingf
AICPAf:fFNfMeasurement
LearningfObjectivef:f01-
04fDescribeftheffinancialfreportingfforfequityfmethodfinvestmentsfandfpreparefGradablef:fautomatic
Difficultyf:f3fHard
AACSBf:fKnowledgefApplicationfAccessibilit
yf:fScreenfReaderfCompatiblefTopicf:fEquityfM
ethod―BasicfJournalfEntries



3) OnfJanuaryf1,f2021,fLeefCompanyfpaidf$1,870,000fforf80,000fsharesfoffThomasfCo.’sfvotin
gfcommonfstockfwhichfrepresentsfaf45%finvestment.fNofallocationftofgoodwillforfotherfspecificfacc
ountfwasfnecessary.fSignificantfinfluencefoverfThomasfwasfachievedfbyfthisfacquisition.fThomasfdi
stributedfafdividendfoff$2.00fperfsharefduringf2021fandfreportedfnetfincomefoff$720,000.fWhatfwasft
hefbalancefinfthefInvestmentfinfThomasfCo.faccountffoundfinftheffinancialfrecordsfoffLeefasfoffDecem
berf31,f2021?
3)ff


A)f $2,114,000.
B)f $2,194,000.
C)f $2,354,000.
D)f $2,158,000.
E)f $2,034,000.



QuestionfDetails
Accessibilityf:fKeyboardfNavigationf
Bloom'sf:fApply
AICPAf:fBBfCriticalfThinkingf
AICPAf:fFNfMeasurement
LearningfObjectivef:f01-
04fDescribeftheffinancialfreportingfforfequityfmethodfinvestmentsfandfpreparefGradablef:fautomatic
Difficultyf:f3fHard
AACSBf:fKnowledgefApplicationfAccess
ibilityf:fScreenfReaderfCompatible
Topicf:fEquityfMethod―InvestmentfAccountfBalance




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4) Afnecessaryfconditionftofusefthefequityfmethodfoffreportingfforfanfequityfinvestmentfisfthat
fthefinvestorfcompanyfmust




4)ff


A) havefthefabilityftofexercisefsignificantfinfluencefoverfthefoperatingfandffinancialfpo
liciesfoffthefinvestee.
B) ownfatfleastf30%foffthefinvestee'sfvotingfstock.
C) possessfafcontrollingfinterestfinfthefinvestee'sfvotingfstock.
D) notfhavefthefabilityftofexercisefsignificantfinfluencefoverfthefoperatingfandffinancialfpol
iciesfoffthefinvestee.



QuestionfDetails
Accessibilityf:fKeyboardfNavigationf
AICPAf:fBBfCriticalfThinkingfAICP
Af:fFNfMeasurement
Bloom'sf:fRemember
AACSBf:fReflectivefThinking
LearningfObjectivef:f01-
03fIdentifyfthefsolefcriterionfforfapplyingfthefequityfmethodfoffaccountingfafGradablef:fautomatic
Difficultyf:f1fEasy
Accessibilityf:fScreenfReaderfCompatible
Topicf:fEquityfMethod―SignificantfInfluencefCriterion



5) OnfJanuaryf1,f2019,fDermotfCompanyfpurchasedf15%foffthefvotingfcommonfstockfoffHor
nefCorp.fOnfJanuaryf1,f2021,fDermotfpurchasedf28%foffHorne’sfvotingfcommonfstock.fIffDermotf
achievesfsignificantfinfluencefwithfthisfnewfinvestment,fhowfmustfDermotfaccountfforfthefchangef
tofthefequityfmethod?
5)ff




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A) Itfmustfusefthefequityfmethodfforf2021fbutfshouldfmakefnofchangesfinfitsffinancialfstat
ementsfforf2020fandf2019.
B) Itfshouldfpreparefconsolidatedffinancialfstatementsfforf2021.
C) Itfmustfrestateftheffinancialfstatementsfforf2020fandf2019fasfiffthefequityfmethodfhadfbee
nfusedfforfthoseftwofyears.
D) Itfshouldfrecordfafpriorfperiodfadjustmentfatfthefbeginningfoff2021fbutfshouldfnotfrest
ateftheffinancialfstatementsfforf2020fandf2019.
E) Itfmustfrestateftheffinancialfstatementsfforf2020fasfiffthefequityfmethodfhadfbeenfuse
dfthen.



QuestionfDetails
Accessibilityf:fKeyboardfNavigationf
AICPAf:fBBfCriticalfThinkingfAICP
Af:fFNfMeasurement
Bloom'sf:fUnderstand
LearningfObjectivef:f01-
06afUnderstandftheffinancialfreportingfconsequencesfforfafchangeftofthefequitfGradablef:fautomatic
Difficultyf:f2fMediumfAACSB
f:fAnalyticalfThinking

Topicf:fReportfChangeftofEquityfMethodf
Accessibilityf:fScreenfReaderfCompatible



6) DuringfJanuaryf2020,fNelson,fInc.facquiredf30%foffthefoutstandingfcommonfstockfoffFu
elfCo.fforf$1,600,000.fThisfinvestmentfgavefNelsonfthefabilityftofexercisefsignificantfinfluencefo
verfFuel.fFuel’sfassetsfonfthatfdatefwerefrecordedfatf$7,200,000fwithfliabilitiesfof
$3,400,000.fAnyfexcessfoffcostfoverfbookfvaluefoffNelson’sfinvestmentfwasfattributedftofunr
ecordedfpatentsfhavingfafremainingfusefulflifefofftenfyears.
Inf2020,fFuelfreportedfnetfincomefoff$650,000.fForf2021,fFuelfreportedfnetfincomefof
$800,000.fDividendsfoff$250,000fwerefpaidfinfeachfofftheseftwofyears.fWhatfwasfthefreportedfbalancefo
ffNelson’sfInvestmentfinfFuelfCo.fatfDecemberf31,f2021?
6)ff




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