Question :
81. On January 1, 2010, Red Company purchased Patriot Shop for : 1228448
81. On January 1, 2010, Red Company purchased Patriot Shop for $400,000 cash. Red Company received the assets listed below and assumed accounts payable (owed by Patriot) amounting to $30,000.
What amount of Goodwill will be recorded in the transaction?
A. $35,000
B. $20,500
C. $50,000
D. $45,000
82. McGinn Company purchased 10% of RJ Company’s common stock during 2010 for $100,000. The 10% investment in RJ had a $90,000 fair value at the end of 2010 and a $105,000 fair value at the end of 2011. Which of the following statements is incorrect if McGinn classifies the investment as available-for-sale security?
A. The 2010 unrealized loss is $10,000, but is not included in McGinn’s 2010 net income.
B. The 2011 unrealized gain is $15,000, but is not included in McGinn’s 2011 net income.
C. The 2011 unrealized gain is $10,000 and is included in McGinn’s 2011 net income.
D. The 2010 unrealized loss is $10,000 and is reported on McGinn’s balance sheet as a component of stockholders’ equity.
83. McGinn Company purchased 10% of RJ Company’s common stock during 2010 for $100,000. The 10% investment in RJ had a $90,000 fair value at the end of 2010 and a $105,000 fair value at the end of 2011. Which of the following statements is correct if McGinn classifies the investment as a trading security?
A. The 2010 unrealized loss is $10,000, but is not included in McGinn’s 2010 net income.
B. The 2011 unrealized gain is $15,000, but is not included in McGinn’s 2011 net income.
C. The 2011 unrealized gain is $15,000 and is included in McGinn’s 2011 net income.
D. The 2010 unrealized loss is $10,000 and is reported on McGinn’s balance sheet as a component of stockholders’ equity and is not reported on the income statement.
84. McGinn Company purchased 10% of RJ Company’s common stock during 2010 for $100,000. The 10% investment in RJ had a $90,000 fair value at the end of 2010 and a $105,000 fair value at the end of 2011. Which of the following statements is correct if McGinn classified the investment as a trading security and sold it at the beginning of 2012 for $102,000?
A. The 2012 realized loss reported on the income statement is $3,000.
B. The 2012 realized gain reported on the income statement is $2,000.
C. The 2012 unrealized gain reported on the income statement is $2,000.
D. The 2012 unrealized loss reported on the income statement is $3,000.
85. McGinn Company purchased 10% of RJ Company’s common stock during 2010 for $100,000. The 10% investment in RJ had a $90,000 fair value at the end of 2010 and a $105,000 fair value at the end of 2011. Which of the following statements is correct if McGinn classified the investment as an available-for-sale security and sold it at the beginning of 2012 for $102,000?
A. The 2012 realized loss reported on the income statement is $3,000.
B. The 2012 realized gain reported on the income statement is $2,000.
C. The 2012 unrealized gain reported on the income statement is $2,000.
D. The 2012 unrealized loss reported on the income statement is $3,000.
86. Rye Company purchased 15% of Lena Company’s common stock during 2010 for $150,000. The 15% investment in Lena had a $160,000 fair value at the end of 2010 and a $140,000 fair value at the end of 2011. Which of the following statements is incorrect if Rye classifies the investment as an available-for-sale security?
A. The 2010 unrealized gain is $10,000, but is not included in Lena’s 2010 net income.
B. The 2011 unrealized loss is $20,000, but is not included in Lena’s 2011 net income.
C. The 2011 unrealized loss is $10,000 and is included in Lena’s 2011 net income.
D. The 2010 unrealized gain is $10,000 and is reported on Lena’s balance sheet as a component of stockholders’ equity.
87. Rye Company purchased 15% of Lena Company’s common stock during 2010 for $150,000. The 15% investment in Lena had a $160,000 fair value at the end of 2010 and a $140,000 fair value at the end of 2011. Which of the following statements is correct if Rye classifies the investment as a trading security?
A. The 2010 unrealized gain is $10,000 and is included in Lena’s 2010 net income.
B. The 2011 unrealized loss is $20,000, but is not included in Lena’s 2011 net income.
C. The 2011 unrealized loss is $10,000 and is included in Lena’s 2011 net income.
D. The 2010 unrealized gain is $10,000 and is reported on Lena’s balance sheet as a component of stockholders’ equity and is not reported within the income statement.
88. Rye Company purchased 15% of Lena Company’s common stock during 2010 for $150,000. The 15% investment in Lena had a $160,000 fair value at the end of 2010 and a $140,000 fair value at the end of 2011. Which of the following statements is correct if Rye classifies the investment as a trading security and sold it at the beginning of 2012 for $148,000?
A. The 2012 realized loss reported on the income statement is $2,000.
B. The 2012 realized gain reported on the income statement is $8,000.
C. The 2012 unrealized gain reported on the income statement is $8,000.
D. The 2012 unrealized loss reported on the income statement is $2,000.
89. Rye Company purchased 15% of Lena Company’s common stock during 2010 for $150,000. The 15% investment in Lena had a $160,000 fair value at the end of 2010 and a $140,000 fair value at the end of 2011. Which of the following statements is correct if Rye classifies the investment as an available-for-sale security and sold it at the beginning of 2012 for $148,000?
A. The 2012 realized loss reported on the income statement is $2,000.
B. The 2012 realized gain reported on the income statement is $8,000.
C. The 2012 unrealized gain reported on the income statement is $8,000.
D. The 2012 unrealized loss reported on the income statement is $2,000.
90. Which of the following accounts is only created as the result of acquiring a controlling interest in another company?
A. Patents
B. Goodwill
C. Acquisition expense
D. Acquisition revenue
