76. 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 the dividends it receives 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
77. Zach Company owns 40% of the voting stock of Tomas Corporation and uses the equity method in recording this investment. Tomas Corporation reported a $20,000 net loss. Zach Corporation’s entry would include a
A. Credit to cash for $8,000
B. Debit to the investment account for $8,000
C. Credit to the investment account for $8,000
D. Debit to a loss account for $8,000
78. 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
79. 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
80. 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
81. 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
82. An investor purchased 500 shares of common stock, $25 par, for $21,750. Subsequently, 100 shares were sold for $40.50 per share. What is the amount of gain or loss on the sale?
A. $4,050 gain
B. $300 gain
C. $300 loss
D. $1,550 gain
83. 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.
D. whether the stock has paid dividends in past years.
84. When the cost method is used to account for an investment, the carrying value of the investment is affected by
A. the dividend distributions of the investee.
B. the periodic net income of the investee.
C. the earnings and dividend distributions of the investee.
D. neither the earnings nor the dividends of the investee.
85. 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.
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