ACCT 5200 QUIZ 2 (TEST PREP) QUESTIONS
Toss a Coin to Your Stitcher Purchased 30,000 of 100,000 outstanding shares of
Yennefer Company common stock on January 1, 20X2 for $180,000. The purchase
price was equal to the book value of the shares purchased. Yennefer reported to the
following
Year Net Income Dividends
20X2 $40,000 $25,000
20X3 $35,000
20X4 $5,000
Compute the amount that should be reported at the carrying value of their investment -
Answer -$195,000 (180 + ((40+35+5)*30%) - (25*30%))
Companies often acquire ownership in other companies using a variety of ownership
arrangements. The investor should use equity-method reporting whenever... - Answer -
The investor has significant influence over the operating and financing decisions of the
investee
Chanax owns 40% of the Rainbow Factory voting shares, and a single shareholder
owns the other 60% of Rainbow Factory voting shares. What method should Chanax
use to account for its investment in the Rainbow Factory? - Answer -Fair Value
Which of the following Journal Entries appropriately reflects the recognition of an
investees income under the equity method of accounting for an investment? - Answer -
Debit Investment / Credit Investment Income
Which of the following need to be eliminated (in some form) in ten consolidation
worksheet in years subsequent to the acquisition date? Assume the subsidiary is wholly
owned.
a. Subsidiary accumulated depreciation on the balance sheet from the acquisition date
b. Subsidiary accumulated depreciation that occurs after the acquisition date
c. Income from Subsidiary
d. Subsidiary Retained Earnings
e. Subsidiary Cash - Answer -A,D,E
Needful Things purchased 40% of the stock of CPP on January 1st 20X2, at underlying
book value. During the period of January 1, 20X2, through December 31, 20X4, the
market value of Needful Thing's Investment in CPP stock increased by $20,000 each
year. The companies reporting following operating results and dividend payments
during the first three years of ownership
Needful Things CPP
Toss a Coin to Your Stitcher Purchased 30,000 of 100,000 outstanding shares of
Yennefer Company common stock on January 1, 20X2 for $180,000. The purchase
price was equal to the book value of the shares purchased. Yennefer reported to the
following
Year Net Income Dividends
20X2 $40,000 $25,000
20X3 $35,000
20X4 $5,000
Compute the amount that should be reported at the carrying value of their investment -
Answer -$195,000 (180 + ((40+35+5)*30%) - (25*30%))
Companies often acquire ownership in other companies using a variety of ownership
arrangements. The investor should use equity-method reporting whenever... - Answer -
The investor has significant influence over the operating and financing decisions of the
investee
Chanax owns 40% of the Rainbow Factory voting shares, and a single shareholder
owns the other 60% of Rainbow Factory voting shares. What method should Chanax
use to account for its investment in the Rainbow Factory? - Answer -Fair Value
Which of the following Journal Entries appropriately reflects the recognition of an
investees income under the equity method of accounting for an investment? - Answer -
Debit Investment / Credit Investment Income
Which of the following need to be eliminated (in some form) in ten consolidation
worksheet in years subsequent to the acquisition date? Assume the subsidiary is wholly
owned.
a. Subsidiary accumulated depreciation on the balance sheet from the acquisition date
b. Subsidiary accumulated depreciation that occurs after the acquisition date
c. Income from Subsidiary
d. Subsidiary Retained Earnings
e. Subsidiary Cash - Answer -A,D,E
Needful Things purchased 40% of the stock of CPP on January 1st 20X2, at underlying
book value. During the period of January 1, 20X2, through December 31, 20X4, the
market value of Needful Thing's Investment in CPP stock increased by $20,000 each
year. The companies reporting following operating results and dividend payments
during the first three years of ownership
Needful Things CPP
