Question :
21) For accounting purposes, the method used to account for : 1230244
21) For accounting purposes, the method used to account for long-term investments in common stock is determined by:
A) the amount paid for the stock by the investor.
B) the extent of an investor’s influence on the investee’s operating decisions and policies.
C) whether the stock has paid dividends in the past years.
D) whether the dividend declared is a cash or stock dividend.
22) If an investor owns less than 20% of the common stock of another company as a long-term investment:
A) the equity method of accounting should be used for the investment.
B) no dividends are expected to be received.
C) the investor usually has little or no influence on the investee.
D) the investor has significant influence on the investee.
23) If 15% of the common stock of an investee company is purchased as a long-term investment, the appropriate method of accounting for the investment is:
A) the available-for-sale method (Market value method).
B) the equity method.
C) the preparation of the consolidated financial statements.
D) agreed upon with owners of the remaining 90% of stock.
24) The available-for-sale method (market value method) of accounting for long-term investments in stock should be used when the:
A) investor owns more than 50% of the investee’s stock.
B) investor has significant influence over the investee’s operating decisions and policies.
C) investor has little or no influence on the investee.
D) investor is a parent company.
25) The market value of an available-for-sale security has decreased from the last carrying value. The journal entry to record this decrease will include:
A) a debit to the Allowance to Adjust Investment to Market.
B) a credit to the Allowance to Adjust Investment to Market.
C) a credit to the Unrealized Loss on Investment.
D) a debit to the Unrealized Loss on Investment.
26) The Allowance to Adjust Investment to Market has a debit balance. Therefore:
A) the Allowance account is subtracted from the carrying amount.
B) the Allowance account is added to the carrying amount.
C) the Allowance account is neither added nor subtracted from the carrying amount.
D) the Allowance account is added to Unrealized Gain or Loss.
27) The market value of an available-for-sale security has increased from the last carrying value. The journal entry to record this increase will include:
A) a debit to the Allowance to Adjust Investment to Market.
B) a credit to the Allowance to Adjust Investment to Market.
C) a debit to the Unrealized Gain on Investment.
D) no adjustment is required.
28) Unrealized gains and losses from available-for-sale investments arise from:
A) the purchase of an investment.
B) the sale of the investment.
C) changes in the market value of the investment.
D) management’s decision to adjust the value of the investment.
29) Realized gains and losses from available-for-sale investments arise from:
A) the purchase of an investment.
B) the sale of the investment.
C) changes in the market value of the investment.
D) management’s decision to adjust the value of the investment.
30) On the balance sheet, available-for-sale investments in stock are reported as:
A) long-term assets.
B) current assets.
C) both long-term assets and stockholders’ equity.
D) either current assets or long-term assets, depending on when the investment is expected to be sold.
