Question : 121. The equity method of accounting for investments A. requires a year-end adjustment : 1234216

121. 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 decreased by the reported net income of the investee

122. Able Company owns 15,000 of the 50,000 shares of common stock outstanding of Troy 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

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

124. Long-term investments are held for all of the listed reasons below except 
A. their income
B. long-term gain potential
C. influence over another business entity
D. meet current cash needs

125. The method of accounting for investments in equity securities in which the investor records its share of periodic net income of the investee is the 
A. cost method
B. market method
C. income method
D. equity method

126. When shares of stock held as an investment are sold, the difference between the proceeds and the carrying amount of the investment is recorded as a(n) 
A. prior period adjustment
B. extraordinary gain or loss
C. paid-in capital addition
D. gain or loss

127. Temporary investments are 
A. recorded at cost but reported at fair market value
B. recorded at cost and reported at cost
C. recorded at cost but reported at lower of cost or fair market value
D. recorded at fair market value and reported at fair market value

128. Which one of the following items below would not affect the investor’s income for the period? 
A. interest received on a temporary investment in bonds
B. dividends received on a long-term investment in stock where the investor owns 10% of the investee’s stock
C. dividends received on a long-term investment in stock where the investor owns 30% of the investee’s stock
D. interest received on a long-term investment in bonds

129. Webber Company owns 28% of the common stock of Patten Company and accounts for the investment using the equity method.  Assuming that Webber Company purchased the stock several years ago, the balance in the investment account would be equal to the cost of the 
A. investment
B. investment plus Webber’s share of Patten’s net income earned since the investment was purchased
C. investment plus the total amount of dividends Webber has received from Patten since the investment was purchased
D. investment plus Webber’s share of Patten’s net income earned since the investment was purchased minus the total amount of dividends Webber has received from Patten since the investment was purchased

130. Bean Corporation purchased 17% of the outstanding shares of common stock of Williams Corporation as a long-term investment. Subsequently, Williams Corporation reported net income and declared and paid cash dividends. What journal entry would Bean Corporation use to record the purchase of Williams Corporation common stock? 
A. debit Investment in Williams Corporation; credit Cash
B. debit Cash; credit Dividend Revenue
C. debit Investment in Williams Corporation; credit Income of Williams Corporation
D. debit Cash; credit Investment in Williams Corporation