TBChap001 Dissertation

Chapter 01

The Equity Approach to Accounting for Investments


1 . Gaw Company owns 15% in the common inventory of Trace Corporation and used the fair-value method to account for this investment. Track reported net income of $110, 000 for 2013 and paid dividends of $60, 000 on October 1, 2013. Just how much income should Gaw recognize on this expenditure in 2013?

A. $16, 500.

B. $9, 500.

C. $25, 500.

G. $7, five-hundred.

E. $50, 000.

2 . Yaro Company owns thirty percent of the common stock of Dew Company. and uses the equity method to are the cause of the expense. During 2013, Dew reported income of $250, 1000 and paid dividends of $80, 000. There is no retirement associated with the expense. During 2013, how much income should Yaro recognize linked to this investment?

A. $24, 000.

B. $75, 500.

C. 99 dollars, 000.

M. $51, 500.

E. $80, 000.


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several. On January 1, 2013, Pacer Company paid $1, 920, 000 for 62, 000 stocks of Lennon Co. is voting common stock which represents a 45% expense. No portion to goodwill or different specific consideration was made. Significant influence over Lennon was achieved by this kind of acquisition. Lennon distributed a dividend of $2. 60 per reveal during 2013 and reported net income of $670, 1000. What was the balance in the Expenditure in Lennon Co. bank account found in the financial documents of Ramonear as of January 31, 2013?

A. $2, 040, five-hundred.

B. $2, 212, five-hundred.

C. $2, 260, five-hundred.

D. $2, 171, five-hundred.

E. $2, 071, five-hundred.

4. A company should always utilize equity approach to account for an investment if:

A. It has a chance to exercise significant influence above the operating guidelines of the investee. B. This owns 30% of one other company's stock.

C. It has a controlling interest (more than 50%) of another business stock. G. The purchase was made mainly to make a return in excess cash. E. It will not have the ability to physical exercise significant affect over the operating policies of the investee.


Copyright В© 2015 McGraw-Hill Education. Every rights appropriated. No reproduction or distribution without the prior written permission of McGraw-Hill Education.

your five. On January 1, 2011, Dermot Firm purchased 15% of the voting common stock of Horne Corp. Upon January 1, 2013, Dermot purchased 28% of Horne's voting common stock. If perhaps Dermot accomplishes significant affect with this new investment, how must Dermot be the cause of the in order to the fairness method?

A. It must make use of the equity way of 2013 nevertheless should make no within its economic statements in january 2012 and 2011.

B. It will prepare consolidated financial transactions for 2013. C. It must restate the financial claims for 2012 and 2011 as though the value method had been used for individuals two years.

M. It should guide them with a prior period adjustment at the outset of 2013 yet should not restate the monetary statements in january 2012 and 2011.

E. It should restate the financial transactions for 2012 as if the collateral method have been used in that case. 6. During January 2012, Wells, Incorporation. acquired thirty percent of the exceptional common inventory of Wilton Co. to get $1, 4 hundred, 000. This kind of investment offered Wells the cabability to exercise significant influence more than Wilton. Wilton's assets upon that time were noted at $6, 400, 1000 with financial obligations of $3, 000, 000. Any excess of cost over book benefit of Wells' investment was attributed to unrecorded patents possessing a remaining valuable life of ten years.

News, Wilton reported net income of $600, 500. For 2013, Wilton reported net income of $750, 1000. Dividends of $200, 000 were paid in these two years. The thing that was the reported balance of Wells' Investment in Pat Co. at December 31, 2013?

A. $1, 609, 000.

B. $1, 325, 000.

C. $1, 685, 000.

Deb. $1, 647, 000.

Electronic. $1, 054, 300.


Copyright В© 2015 McGraw-Hill Education. Most rights appropriated. No reproduction or distribution without the before written agreement of McGraw-Hill Education.



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