Question : 61. On May 1, 2011, Stanton Company purchased $50,000 of Harris : 1251453

61. On May 1, 2011, Stanton Company purchased $50,000 of Harris Company’s 12% bonds at 100 plus accrued interest of $2,000. On June 30, 2011, Stanton received its first semiannual interest.  On February 1, 2012, Stanton sold $40,000 of the bonds at 103 plus accrued interest.

The journal entry Stanton will record on February 1, 2012, will include: 
A. a credit to Interest Revenue for $1,200.
B. a credit to Gain on Sale of Investments for $1,200.
C. a debit to Cash for $41,200.
D. a credit to Interest Receivable for $500.

62. On May 1, 2011, Stanton Company purchased $50,000 of Harris Company’s 12% bonds at 100 plus accrued interest of $2,000. On June 30, 2011, Stanton received its first semiannual interest.  On February 1, 2012, Stanton sold $40,000 of the bonds at 103 plus accrued interest.

What are the total proceeds from the February 1, 2012 sale? 
A. $42,000
B. $41,700
C. $40,600
D. $41,600

63. Which of the following stock investments should be accounted for using the cost method? 
A. investments of less than 20%
B. investments between 20 % and 50%
C. investments of less than 20% and investments between 20% and 50%
D. all stock investments should be accounted for using the cost method

64. Which of the following statements below is not a reason a company may purchase another company’s stock? 
A. earning a return on excess cash
B. sustain the other company’s stock price
C. gaining control of another company’s operations
D. developing or maintaining business relationships

65. The cost method of accounting for stock 
A. recognizes dividends as income
B. is only appropriate as part of a consolidation
C. requires the investment be increased by the reported net income of the investee
D. requires the investment be decreased by the reported net income of the investee

66. An investor purchased 500 shares of common stock, $25 par, for $21,750. Subsequently, 100 shares were sold for $49.50 per share.  What is the amount of gain or loss on the sale? 
A. $12,750 gain
B. $600 gain
C. $600 loss
D. $9,250 loss

67. Held to maturity securities  
A. are reported at fair market value
B. include stocks as well as bonds
C. may be reported as current or noncurrent assets
D. all of the above

68. The equity method of accounting for investments  
A. requires a year-end adjustment to revalue the stock to lower of cost or market
B. requires the investment to be reported at its original cost
C. requires the investment be increased by the reported net income of the investee
D. requires the investment be increased by the dividends paid by the investee

69. Armando Company owns 15,000 of the 50,000 shares of common stock outstanding of Tito Company and exercises a significant influence over its operating and financial policies.  The investment should be accounted for by the  
A. equity method
B. market method
C. cost or market method
D. cost method

70. Under the equity method, the receipt of cash dividends on an investment in common stock of Vallerio Corporation is accounted for as a debit to Cash and a credit to  
A. Investment in Vallerio
B. Retained Earnings
C. Dividend Revenue
D. Dividend Receivables