1. Which of the following would be considered an “Other Comprehensive Income” item?
a. |
net income. |
b. |
extraordinary loss related to flood. |
c. |
gain on disposal of discontinued operations. |
d. |
unrealized loss on available-for-sale securities. |
2. Which of the following is not a part of comprehensive income?
a. |
foreign currency items |
b. |
restructuring charges |
c. |
unrealized gains and losses |
d. |
pension liability adjustments |
3. Companies may report comprehensive income on each of the statements below except
a. |
income statement |
b. |
separate statement of comprehensive income |
c. |
statement of stockholders’ equity |
d. |
retained earnings statement |
4. An investor purchased 500 shares of common stock, $25 par, for $21,750. Subsequently, 100 shares were sold for $49.50 per share. What is the amount of gain or loss on the sale?
a. |
$12,750 gain |
b. |
$600 gain |
c. |
$600 loss |
d. |
$9,250 loss |
5. During the current year, the Yankton Company purchased 200 shares of in the Sorros Company for $13,000 as a temporary investment (trading security). At the end of the year, the market value of the stock was $11,000. The Yankton Company’s financial statements for the current year should show
a. |
a loss of $2,000 on the income statement and a net trading investments (at fair value) of $13,000 on the balance sheet |
b. |
no loss on the income statement and a net trading investments (at fair value)s of $13,000 on the balance sheet |
c. |
a gain of $2,000 on the income statement and a net trading investments (at fair value) of $11,000 on the balance sheet |
d. |
a loss of $2,000 on the income statement and a net trading investments (at fair value) of $11,000 on the balance sheet |
6. The account Unrealized Loss on Available-for-Sale Investments in Stock should be included in the
a. |
Income statement |
b. |
Balance sheet as an addition to Temporary Investments in Stock |
c. |
Balance sheet as a deduction in Stockholders’ Equity |
d. |
Statement of Retained Earnings |
7. The equity method of accounting for investments
a. |
requires a year-end adjustment to revalue the stock to lower of cost or market |
b. |
requires the investment to be reported at its original cost |
c. |
requires the investment be increased by the reported net income of the investee |
d. |
requires the investment be decreased by the reported net income of the investee |
8. Armando Company owns 15,000 of the 50,000 shares of common stock outstanding of Tito Company and exercises a significant influence over its operating and financial policies. The investment should be accounted for by the
a. |
equity method |
b. |
market method |
c. |
cost or market method |
d. |
cost method |
9. Under the equity method, the receipt of cash dividends on an investment in common stock of Vallerio Corporation is accounted for as a debit to Cash and a credit to
a. |
Investment in Vallerio |
b. |
Retained Earnings |
c. |
Dividend Revenue |
d. |
Dividend Receivables |
10. Long-term investments are held for all of the listed reasons below except
a. |
their income |
b. |
long-term gain potential |
c. |
influence over another business entity |
d. |
meet current cash needs |
11. When shares of stock held as an investment are sold, the difference between the proceeds and the carrying amount of the investment is recorded as a(n)
a. |
prior period adjustment |
b. |
extraordinary gain or loss |
c. |
paid-in capital addition |
d. |
gain or loss |
12. Investments such as Trading Securities & Available-for-sale securities are
a. |
recorded at cost but reported at fair market value |
b. |
recorded at cost and reported at cost |
c. |
recorded at cost but reported at lower of cost or fair market value |
d. |
recorded at fair market value and reported at fair market value |
13. Blanton Corporation purchased 17% of the outstanding shares of common stock of Worton Corporation as a long-term investment. Subsequently, Worton Corporation reported net income and declared and paid cash dividends. What journal entry would Blanton Corporation use to record the purchase of Worton Corporation common stock?
a. |
debit Investment in Worton Corporation; credit Cash |
b. |
debit Cash; credit Dividend Revenue |
c. |
debit Investment in Worton Corporation; credit Income of Worton Corporation |
d. |
debit Cash; credit Investment in Worton Corporation |
14. Blanton Corporation purchased 17% of the outstanding shares of common stock of Worton Corporation as a long-term investment. Subsequently, Worton Corporation reported net income and declared and paid cash dividends. What journal entry would Blanton Corporation use to record dividends from Worton Corporation?
a. |
debit Investment in Worton Corporation; credit Cash |
b. |
debit Cash; credit Dividend Revenue |
c. |
debit Investment in Worton Corporation; credit Income of Worton Corporation |
d. |
debit Cash; credit Investment in Worton Corporation
|
15. Blanton Corporation purchased 35% of the outstanding shares of common stock of Worton Corporation as a long-term investment. Subsequently, Worton Corporation reported net income and declared and paid cash dividends. What journal entry would Blanton Corporation use to record its share of the earnings of Worton Corporation?
a. |
debit Investment in Worton Corporation Stock; credit Cash |
b. |
debit Cash; credit Dividend Revenue |
c. |
debit Investment in Worton Corporation; credit Income of Worton Corporation |
d. |
debit Cash; credit Investment in Worton Corporation |
16. Parker Company owns 83% of the outstanding stock of Tadeo Company. Parker Company is referred to as the
a. |
parent |
b. |
minority interest |
c. |
affiliate |
d. |
subsidiary |
17. Gale Company owns 87% of the outstanding stock of Leonardo Company. Leonardo Company is referred to as the
a. |
parent |
b. |
minority interest |
c. |
affiliate |
d. |
subsidiary |
18. Financial statements in which financial data for two or more companies are combined as a single entity are called
a. |
conventional statements |
b. |
consolidated statements |
c. |
audited statements |
d. |
constitutional statements |
19. In general, consolidated financial statements should be prepared
a. |
when a corporation owns more than 20% of the common stock of another company |
b. |
when a corporation owns more than 50% of the common stock of another company |
c. |
only when a corporation owns 100% of the common stock of another company |
d. |
whenever the market value of the stock investment is significantly lower than its cost |
20. For accounting purposes, the method used to account for investments in common stock is determined by
a. |
the amount paid for the stock by the investor. |
b. |
whether the acquisition of the stock by the investor was “friendly” or “hostile.” |
c. |
the extent of an investor’s influence over the operating and financial affairs of the investee (indicated by the share of ownership possessed). |
d. |
whether the stock has paid dividends in past years. |
21. The company whose stock is owned by the parent company is called the
a. |
controlled company. |
b. |
investee company. |
c. |
subsidiary company. |
d. |
sibling company. |
22. A company that owns more than 50% of the common stock of another company is known as the
a. |
parent company. |
b. |
management company. |
c. |
subsidiary company. |
d. |
in-charge company.
|
23. All of the following are disadvantages of fair value use except:
a. |
fair values may not be readily obtainable. |
b. |
fair values may cause more fluctuations as change occurs from period to period. |
c. |
comparability between companies may be impacted by different fair value measurement. |
d. |
fair values can only be reflected in balance sheet accounts. |
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