61.
Sandor Company owns an investment portfolio of available–for-sale securities. During 2016,
Sandor received $3,000 of dividends and $1,000 of interest from the securities in the portfolio.
The fair value of the portfolio on January 1, 2016 was $86,000 and the fair value of the
portfolio at December 31, 2016 was $98,000. The economic return from investing ratio is
closest to:
62.
When is the equity method used to account for long-term investments in common stock?
63.
Which of the following statements regarding the accounting for a common stock investment
using the equity method is incorrect?
64.
Significant influence over the operating and financial policies of another company would not
be indicated by:
65.
Gilman Company purchased 100,000 of the 250,000 shares of common stock of Burke
Corporation on January 1, 2016, at $40 per share as a long-term investment. The records of
Burke Corporation showed the following on December 31, 2016:
2016 net income
$575,000
Dividends declared and paid during
December, 2016
$30,000
Market price per share
$42
At what amount should Gilman Company report the Burke investment on the December 31,
2016 balance sheet?
Initial cost
Balance, December 31, 2016
66.
Gilman Company purchased 100,000 of the 250,000 shares of common stock of Burke
Corporation on January 1, 2016, at $40 per share as a long-term investment. The records of
Burke Corporation showed the following on December 31, 2016:
2016 net income
$575,000
Dividends declared and paid during
December, 2016
$30,000
Market price per share
$42
How much should Gilman Company report as investment income from the Burke investment
during 2016?
67.
JDR Company purchased 40% of the common stock of YRK Corporation on January 1, 2016,
for $2,000,000 as a long-term investment. The records of YRK Corporation showed the
following on December 31, 2016:
2016 net income
$290,000
Dividends declared and paid during
December, 2016
$20,000
At what amount should JDR report the YRK investment on the December 31, 2016 balance
sheet?
$290,000 × 40%
Balance, December 31, 2016
68.
Copper Company purchased 40% of the common stock of York Corporation on January 1,
2016, for $2,000,000 as a long-term investment. The records of York Corporation showed the
following on December 31, 2016:
2016 net income
$290,000
Dividends declared and paid during
December, 2016
$20,000
How much investment income should Copper report from the York investment during 2016?
69.
Heartfelt Company owns a 40% interest in the voting common stock of Candle Corporation,
and Heartfelt accounts for the investment using the equity method. During 2016, Candle
Corporation reported net income of $100,000 and declared and paid cash dividends of
$10,000. The carrying value of the Candle investment was $500,000 on January 1, 2016.
How much investment income should Heartfelt report during 2016 from the Candle
investment?
70.
Heartfelt Company owns a 40% interest in the voting common stock of Candle Corporation,
and Heartfelt accounts for the investment using the equity method. During 2016, Candle
Corporation reported net income of $100,000 and declared and paid cash dividends of
$10,000. The carrying value of the Candle investment was $500,000 on January 1, 2016.
At what amount is the Candle investment reported on the December 31, 2016 balance sheet
of Heartfelt Company?
71.
On January 1, 2016, Palmer, Inc. bought 40% of the outstanding shares of Arnold Corporation
at a cost of $137,000. Palmer uses the equity method of accounting for this investment.
During 2016, Arnold Corporation reported $30,000 of net income and paid a total of $10,000 in
cash dividends. At the end of 2016, the shares had a fair value of $150,000.
At what amount should the Arnold investment be reported at on the December 31, 2016
balance sheet of Palmer, Inc.?
72.
On January 1, 2016, Palmer, Inc. bought 40% of the outstanding shares of Arnold Corporation
at a cost of $137,000. Palmer uses the equity method of accounting for this investment.
During 2016, Arnold Corporation reported $30,000 of net income and paid a total of $10,000 in
cash dividends. At the end of 2016, the shares had a fair value of $150,000.
At the end of 2016, the shares had a fair value of $150,000. What is the amount of Equity in
Affiliate Earnings for 2016?
73.
On January 1, 2016, Calas Company acquired 40% of the outstanding voting common stock of
Nick Company as a long-term investment. During 2016, Nick reported net income of $10,000
and declared and paid dividends of $4,000. During 2016, Calas Company should report equity
in affiliate earnings of:
74.
On January 1, 2016, Turtle Inc. bought 30% of the outstanding shares of Shell Corporation
common stock at a cost of $150,000. Turtle uses the equity method of accounting for this
investment is used. During 2016, Shell Corporation reported $40,000 of net income and paid a
total of $5,000 in cash dividends. At the end of 2016, the shares had a fair value of $160,000.
How much investment income will Turtle report for equity in affiliate earnings during 2016?
75.
On January 1, 2016, Turtle Inc. bought 30% of the outstanding shares of Shell Corporation
common stock at a cost of $150,000. Turtle uses the equity method of accounting for this
investment is used. During 2016, Shell Corporation reported $40,000 of net income and paid a
total of $5,000 in cash dividends. At the end of 2016, the shares had a fair value of $160,000.
At the end of 2016, the shares of Shell Corporation had a fair value of $160,000. What
investment balance will be reported on Turtle’s December 31, 2016 balance sheet?
76.
When is the equity method not used to account for a long-term investment in common stock?
77.
Which of the following statements is false with regard to investments and the cash flow
statement?
78.
Which of the following statements is correct with regard to investments and the statement of
cash flows?
79.
Photo Finish Corporation bought a 40% interest in Click-It Corporation’s $1 par value voting
common stock on March 31, 2017. On that date, Click-It paid $20 million for 2 million shares
at a $10 market price per share. On December 31, 2017, Click-It paid a $1 million cash
dividend declared earlier in 2017, and reported net income for the year ended 2017 of $10
million. On December 31, 2017, Click-It’s stock was trading at $11.50 per share.
What effect will the dividend have on the Photo Finish financial statements?
80.
Photo Finish Corporation bought a 40% interest in Click-It Corporation’s $1 par value voting
common stock on March 31, 2017. On that date, Click-It paid $20 million for 2 million shares
at a $10 market price per share. On December 31, 2017, Click-It paid a $1 million cash
dividend declared earlier in 2017, and reported net income for the year ended 2017 of $10
million. On December 31, 2017, Click-It’s stock was trading at $11.50 per share.
At what amount will the Click-It investment be reported on Photo Finish’s December 31, 2017
balance sheet?
81.
Fun with Florals Corporation acquired all the voting common stock shares of Crafts–to-Go
Corporation under the acquisition method. Crafts–to-Go remains a separate corporation.
Which of the following statements about the financial statements is true?
82.
The use of consolidation accounting for a long-term investment in common stock of another
company is required when the ownership of its voting stock is:
83.
On January 1, 2016, Shelley Company paid $650,000 cash for 100% of the outstanding
common stock of SCD Company. SCD’s stockholders equity on the date of acquisition was
$500,000. The current fair value of SCD’s plant and equipment was $100,000 in excess of the
equipment’s book value. If the fair value and book value are the same for SCD’s remaining
assets and liabilities, what was the amount of goodwill acquired by Shelley Company?
84.
On January 1, 2016, Sheldon Company paid $750,000 cash for 100% of the outstanding
common stock of Mullen Company; Mullen’s book value of assets minus liabilities on the date
of acquisition was $550,000. The current fair value of Mullen’s net assets was $70,000 in
excess of their book value. What was the amount of goodwill acquired by Sheldon Company?