Advanced Accounting, 5th Edition
M by Susan S. Hamlen
ED
ST
U
D
Y
, CHAPTER 1
SOLUTIONS TO MULTIPLE CHOICE QUESTIONS, EXERCISES AND PROBLEMS
MULTIPLE CHOICE QUESTIONS
1. c
$180,000 - $160,000 = $20,000
$125,000 - $100,000 = 25,000
Total gain $45,000
M
2. a
$29,000 – $26,000 = $3,000
ED
3. a
$207,544 – [(6% x $200,000) – (4% x $207,544)] = $203,846
ST
4. d
Reclassification of unrealized loss on AFS securities sold $1,000 credit
Unrealized gain on AFS securities held at year-end 6,000 credit (1)
U
Total amount reported in OCI $7,000 credit
(1) $81,000 – ($100,000 – $25,000) = $6,000 unrealized gain
D
5. d
Y
$5,000,000 + [40% x ($600,000 – $200,000)] = $5,160,000
6. b
,7. b
Reported net income; 35% x $7,000,000 = $ 2,450,000
Less unconfirmed profit on ending inventory
35% x [$6,000,000 – ($6,000,000/1.25)] = (420,000)
Equity in net income $ 2,030,000
Less dividends; 35% x $2,000,000 (700,000)
Plus beginning investment balance 50,000,000
Ending investment balance $51,330,000
8. d
M
Fizzy’s entry to record the acquisition is:
Current assets 25,000
ED
Property 2,500,000
Goodwill 25,475,000
Liabilities 3,000,000
Cash 25,000,000
ST
9. b
10. a
11. b
U
The entry to record the sale is:
D
Cash 410,000
Loss on sale of AFS securities 15,000
Y
Investment in AFS securities 400,000
Other comprehensive income 25,000
The reclassification of the loss increases OCI, and the loss reported in income is the
difference between the original cost ($400,000 + $25,000) and sales proceeds ($410,000).
12. b
$285,000 - $300,000 = $15,000 loss
, 13. d
Investment balance at the beginning of 2023 is $203,883 (=$205,768 – ($6,000 – (2% x
$205,768)); 2% x $203,883 = $4,078
14. c
Investment balance at the end of 2022 is $203,827 (=$205,657 – ($8,000 – (3% x
$205,657)); $190,000 - $203,827 = $13,827 loss
15. c
$510,000 - $500,000 = $10,000; unrealized gains are reported in income.
M
16. b
The basis difference is $180,000 (=$3,000,000 – (30% x $9,400,000))
ED
(30% x $100,000) – $180,000/10 = $12,000
17. d
Investment balance, beginning of 2020 $10,000,000
($2,400,000 - $2,000,000) x 40% = 160,000
ST
($150,000 - $200,000) x 40% = (20,000)
($60,000 + $10,000 - $25,000) x 40% = 18,000
Investment balance, end of 2025 $10,158,000
18. b
U
$10,000,000 – ($400,000 + $5,000,000 - $6,000,000) = $10,600,000
D
19. c
$25,000,000 – ($500,000 + $8,000,000 + $1,000,000 - $6,000,000) = $21,500,000
Y
20. c
M by Susan S. Hamlen
ED
ST
U
D
Y
, CHAPTER 1
SOLUTIONS TO MULTIPLE CHOICE QUESTIONS, EXERCISES AND PROBLEMS
MULTIPLE CHOICE QUESTIONS
1. c
$180,000 - $160,000 = $20,000
$125,000 - $100,000 = 25,000
Total gain $45,000
M
2. a
$29,000 – $26,000 = $3,000
ED
3. a
$207,544 – [(6% x $200,000) – (4% x $207,544)] = $203,846
ST
4. d
Reclassification of unrealized loss on AFS securities sold $1,000 credit
Unrealized gain on AFS securities held at year-end 6,000 credit (1)
U
Total amount reported in OCI $7,000 credit
(1) $81,000 – ($100,000 – $25,000) = $6,000 unrealized gain
D
5. d
Y
$5,000,000 + [40% x ($600,000 – $200,000)] = $5,160,000
6. b
,7. b
Reported net income; 35% x $7,000,000 = $ 2,450,000
Less unconfirmed profit on ending inventory
35% x [$6,000,000 – ($6,000,000/1.25)] = (420,000)
Equity in net income $ 2,030,000
Less dividends; 35% x $2,000,000 (700,000)
Plus beginning investment balance 50,000,000
Ending investment balance $51,330,000
8. d
M
Fizzy’s entry to record the acquisition is:
Current assets 25,000
ED
Property 2,500,000
Goodwill 25,475,000
Liabilities 3,000,000
Cash 25,000,000
ST
9. b
10. a
11. b
U
The entry to record the sale is:
D
Cash 410,000
Loss on sale of AFS securities 15,000
Y
Investment in AFS securities 400,000
Other comprehensive income 25,000
The reclassification of the loss increases OCI, and the loss reported in income is the
difference between the original cost ($400,000 + $25,000) and sales proceeds ($410,000).
12. b
$285,000 - $300,000 = $15,000 loss
, 13. d
Investment balance at the beginning of 2023 is $203,883 (=$205,768 – ($6,000 – (2% x
$205,768)); 2% x $203,883 = $4,078
14. c
Investment balance at the end of 2022 is $203,827 (=$205,657 – ($8,000 – (3% x
$205,657)); $190,000 - $203,827 = $13,827 loss
15. c
$510,000 - $500,000 = $10,000; unrealized gains are reported in income.
M
16. b
The basis difference is $180,000 (=$3,000,000 – (30% x $9,400,000))
ED
(30% x $100,000) – $180,000/10 = $12,000
17. d
Investment balance, beginning of 2020 $10,000,000
($2,400,000 - $2,000,000) x 40% = 160,000
ST
($150,000 - $200,000) x 40% = (20,000)
($60,000 + $10,000 - $25,000) x 40% = 18,000
Investment balance, end of 2025 $10,158,000
18. b
U
$10,000,000 – ($400,000 + $5,000,000 - $6,000,000) = $10,600,000
D
19. c
$25,000,000 – ($500,000 + $8,000,000 + $1,000,000 - $6,000,000) = $21,500,000
Y
20. c
