Question : 90.The ability of an investing company to affect the operating : 1244278

90.The ability of an investing company to affect the operating and financial policies of another company, even though the investor holds less than 50 percent of the voting stock, is known as

 

a.

significant influence.

b.

noninfluential control.

c.

control.

d.

minority interest.

 

 

 

91.The cost-adjusted-to-market method of accounting for investments is used when the investment is

 

a.

controlling.

b.

noninfluential and controlling.

c.

noninfluential and noncontrolling.

d.

influential and noncontrolling.

 

 

 

92.Petrus Corporation owns a 40 percent interest in the stock of Sunseri Corporation. During 20×7, Sunseri pay $25,000 in dividends to Petrus and reports $79,000 in net income. Petrus Corporation’s investment in Sunseri will increase Petrus’s income before income taxes by

 

a.

$21,600.

b.

$41,600.

c.

$31,600.

d.

$6,600.

 

 

 

93.Rapp Corporation has invested in the stock of two other corporations, Hart Corporation and Hilker Corporation. Rapp does not own a controlling interest or exercise significant influence over either corporation. Rapp’s accountant is preparing financial statements and has compiled the following information:

 

Stock name

No. of shares

Cost

Market

Hart

  1,000

$23,000

$24,000

Hilker

     500

  27,500

  25,500

 

What should be the balance in the Allowance to Adjust Long-Term Investments to Market account, based on the above information?

 

a.

$2,000 credit

b.

$1,000 credit

c.

$1,000 debit

d.

$2,000 debit

 

 

 

94.A credit balance in the account Allowance to Adjust Long-Term Investments to Market is disclosed in the financial statements as a

 

a.

note to the financial statements.

b.

contra account in the stockholders’ equity section of the balance sheet.

c.

liability.

d.

contra account to Long-Term Investments.

 

 

 

95.Milner Corporation owns 25 percent of the voting stock of Vaglia Corporation and accounts for the investment using the equity method. Vaglia reports a net loss of $10,000. Milner Corporation’s entry would include a

 

a.

credit to Investment in Vaglia Corporation for $10,000.

b.

credit to Loss, Vaglia Corporation Investment for $2,500.

c.

debit to Cash for $2,500.

d.

credit to Investment in Vaglia Corporation for $2,500.

 

 

 

96.Mucura Enterprises has a credit balance of $40,000 in its Allowance to Adjust Long-Term Investments to Market account before adjustment. Its investment portfolio has a total cost of $250,000 and a market value of $225,000. The year-end adjustment would include which of the following?

 

a.

A credit to Allowance to Adjust Long-Term Investments to Market for $15,000

b.

A credit to Long-Term Investments for $25,000

c.

A debit to Unrealized Loss on Long-Term Investments for $25,000

d.

A debit to Allowance to Adjust Long-Term Investments to Market for $15,000

 

 

 

97.Under the cost-adjusted-to-market method of accounting for an investment,

 

a.

Investment Income is credited when the invested reports a net income.

b.

the investment account is credited when the investee reports a net income.

c.

Dividend Income is credited when dividends are received.

d.

the investment account is credited when dividends are received.

 

 

 

98.B & L Company has a credit balance of $44,000 in its Allowance to Adjust Long-Term Investments to Market account at the end of 20×7, before adjustment. Its investment portfolio has a total cost of $300,000 and a market value of $264,000 at December 31, 20×7, a balance sheet date. The year-end adjustment necessary would include a

 

a.

debit to the Allowance to Adjust Long-Term Investments to Market account of $8,000.

b.

debit to the Unrealized Loss on Long-Term Investments account of $8,000.

c.

credit to the Realized Gain on Long-Term Investments account of $8,000.

d.

credit to the Allowance to Adjust Long-Term Investments to Market account of $8,000.

 

 

 

99.Flubber Corporation owns 40 percent of the voting stock of Rhim Corporation and accounts for the investment using the equity method. Rhim Corporation reports a net loss of $30,000. Flubber Corporation’s entry would include a

 

a.

debit to the Investment in Flubber Corporation account for $30,000.

b.

credit to the Investment in Flubber Corporation account for $12,000.

c.

debit to the Investment in Flubber Corporation account for $12,000.

d.

credit to the Loss, Flubber Corporation Investment, account for $12,000.