81. A company that owns more than 50% of the common stock of another company is known as the
A. parent company.
B. management company.
C. subsidiary company.
D. in-charge company.
82. If one company owns more than 50% of the common stock of another company a
A. a partnership exists.
B. parent–subsidiary relationship exists.
C. the company whose stock is owned must be liquidated
D. the cost method should be used to account for the investment.
83. All of the following are factors contributing to the trend for regulators to adopt accounting principles using fair value concepts except:
A. a greater percentage of total assets existing as receivables and securities.
B. pressure on regulators to adopt an international set of accounting principles and standards.
C. hybrid measurement methods within GAAP that conflict with each other.
D. the ease of applying market values to assets and liabilities.
84. All of the following are disadvantages of fair value use except:
A. fair values may not be readily obtainable.
B. fair values may cause more fluctuations as change occurs from period to period.
C. comparability between companies may be impacted by different fair value measurement.
D. fair values can only be used on balance sheet accounts.
85. On January 1, 2010, Blanton Company’s Valuation Allowance for Trading Investments account has a debit balance of $22,500. On December 31, 2010, the cost of the trading securities portfolio was $80,000. The fair value was $98,000. Which of the following would Blanton report?
A. an Unrealized Loss on Trading Investments of $4,500.
B. an Unrealized Gain on Trading Investments of $4,500.
C. an Unrealized Gain on Trading Investments of $18,000.
D. an Unrealized Loss on Trading Investments of $18,000.
86. On April 1, 2010, Stanton Company purchased $50,000 of Harris Company’s 12% bonds at 100 plus accrued interest of $2,000. On June 30, 2010, Stanton received its first semiannual interest. On February 1, 2011, Stanton sold $40,000 of the bonds at 103 plus accrued interest. The journal entry Stanton will record on April 1, 2010, will include:
A. a credit to Interest Payable for $2,000.
B. a debit to Investments – Harris Company for $52,000.
C. a credit for Cash of $50,000.
D. a debit to Investments – Harris Company for $50,000.
87. Use the following information to answer questions 48-50.
On May 1, 2010, Stanton Company purchased $50,000 of Harris Company’s 12% bonds at 100 plus accrued interest of $2,000. On June 30, 2010, Stanton received its first semiannual interest. On February 1, 2011, Stanton sold $40,000 of the bonds at 103 plus accrued interest.
The journal entry Stanton will record on June 30, 2010, will include:
A. a credit to Interest Revenue for $2,000.
B. a debit to Cash for $3,000.
C. a debit to Cash for $2,000.
D. a credit to Interest Receivable for $1,000.
88. Use the following information to answer questions 48-50.
On May 1, 2010, Stanton Company purchased $50,000 of Harris Company’s 12% bonds at 100 plus accrued interest of $2,000. On June 30, 2010, Stanton received its first semiannual interest. On February 1, 2011, Stanton sold $40,000 of the bonds at 103 plus accrued interest.
The journal entry Stanton will record on February 1, 2011, 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.
89. Use the following information to answer questions 48-50.
On May 1, 2010, Stanton Company purchased $50,000 of Harris Company’s 12% bonds at 100 plus accrued interest of $2,000. On June 30, 2010, Stanton received its first semiannual interest. On February 1, 2011, Stanton sold $40,000 of the bonds at 103 plus accrued interest.
What are the total proceeds from the February 1, 2011 sale?
A. $42,000
B. $41,700
C. $40,600
D. $41,600
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