29 Jun Question Acct 557 Chapter 12 quiz
Question
Acct 557 Chapter 12 quiz
Multiple Choice Question 92
On January 1, 2013, Audrey Corp. paid $800,000 for 100,000 shares of Off Company’s common stock, which represents 40% of Off’s outstanding common stock. Off reported net income of $200,000 and paid cash dividends of $60,000 during 2013. Audrey should report the investment in Off Company on its December 31, 2013, balance sheet at:
$856,000
$744,000
$824,000
$800,000
Multiple Choice Question 90
On August 1, Mistery Company buys 2,000 shares of ABC common stock for $70,000 cash plus brokerage fees of $2,200. On December 1, the stock investments are sold for $76,000 in cash. Which of the following are the correct journal entries to record for the purchase and sale of the common stock?
Aug. 1 Cash 72,200
Stock Investments 72,200
Dec. 1 Cash 76,000
Stock Investments 72,200
Gain on Sale of Stock Investments 3,800
Aug. 1 Stock Investments 72,200
Cash 72,200
Dec. 1 Stock Investments 76,000
Cash 72,200
Gain on Sale of Stock Investments 3,800
Aug. 1 Stock Investments 72,200
Cash 72,200
Dec. 1 Cash 76,000
Stock Investments 72,200
Gain on Sale of Stock Investments 3,800
Aug. 1 Cash 72,200
Stock Investments 72,200
Dec. 1 Stock Investments 76,000
Cash 72,200
Gain on Sale of Stock Investments 3,800
Multiple Choice Question 91
Laramie industries owns 45% of McCook Company. For the current year, McCook reports net income of $250,000 and declares and pays a $60,000 cash dividend. Which of the following correctly presents the journal entries to record Laramie’s equity in McCook’s net income and the receipt of dividends from McCook?
Dec. 31 Revenue from Stock Investments 112,500
Stock Investments 112,500
Dec. 31 Stock Investments 27,000
Cash 27,000
Dec. 31 Stock Investments 85,500
Revenue from Stock Investments 85,500
Dec. 31 Stock Investments 112,500
Revenue from Stock Investments 112,500
Dec. 31 Cash 27,000
Stock Investments 27,000
Dec. 31 Stock Investments 112,500
Revenue from Stock Investments 112,500
Dec. 31 Cash 60,000
Stock Investments 60,000
Multiple Choice Question 60
Tan Company had these transactions pertaining to stock investments:
Feb. 1 Purchased 3,000 shares of Norton Company (10%) for $49,800 cash plus brokerage fees of $1,200.
June 1 Received cash dividends of $3 per share on Norton stock.
Oct. 1 Sold 1,200 shares of Norton stock for $24,000 less brokerage fees of $600.
The entry to record the receipt of the dividends on June 1 would include a
debit to Stock Investments for $9,000.
credit to Dividend Revenue for $9,000.
credit to Stock Investments for $9,000.
debit to Dividend Revenue for $9,000.
Multiple Choice Question 78
Under the equity method, the Stock Investments account is increased when the
stock investment is sold at a gain.
investee company pays a dividend.
investee company reports net income.
investee company reports a loss.
Multiple Choice Question 125
Gorman Corporation has the following trading portfolio of stock investments as of December 31, 2013.
Security Cost Fair Value
A $21,000 $ 19,000
B 19,000 25,000
C 37,000 31,000
$77,000 $75,000
On January 22, 2014, Gorman Corporation sold security C for $32,000. Assuming that Gorman made the proper adjustments when closing its books on December 31, 2013, the journal entry for the 2014 sale would include a
credit to Fair Value Adjustment–Trading for $32,000.
credit to Unrealized Gain–Income for $1,000.
debit to Unrealized Loss–Income for $5,000.
debit to Loss on Sale of Stock Investments for $5,000.
Multiple Choice Question 99
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