Question :
71. The method of accounting for investments in equity securities in : 1239343
71. 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
72. 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. operating income and losses
C. paid-in capital addition
D. gain or loss
73. 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
74. Wendell Company owns 28% of the common stock of Porter Company and accounts for the investment using the equity method. Assuming that Wendell Company purchased the stock several years ago, the balance in the investment account would be equal to the cost of the
A. investment only
B. investment plus Wendell’s share of Porter’s net income earned since the investment was purchased
C. investment plus the total amount of dividends Wendell has received from Porter since the investment was purchased
D. investment plus Wendell’s share of Porter’s net income earned since the investment was purchased minus the total amount of dividends Wendell has received from Porter since the investment was purchased
75. Blanton Corporation purchased 15% of the outstanding shares of common stock of Worton Corporation as a long-term investment. Subsequently, Worton Corporation reported net income and declared and paid cash dividends. What journal entry would Blanton Corporation use to record the dividends it receives?
A. debit Investment in Worton Corporation; credit Cash
B. debit Cash; credit Dividend Revenue
C. debit Investment in Worton Corporation; credit Income of Worton Corporation
D. debit Cash; credit Investment in Worton Corporation
76. Blanton Corporation purchased 35% of the outstanding shares of common stock of Worton Corporation as a long-term investment. Subsequently, Worton Corporation reported net income and declared and paid cash dividends. What journal entry would Blanton Corporation use to record the dividends it receives from Worton Corporation?
A. debit Investment in Worton Corporation; credit Cash
B. debit Cash; credit Dividend Revenue
C. debit Investment in Worton Corporation; credit Income of Worton Corporation
D. debit Cash; credit Investment in Worton Corporation
77. Zach Company owns 45% of the voting stock of Tomas Corporation and uses the equity method in recording this investment. Tomas Corporation reported a $20,000 net loss. Zach Company’s entry would include a
A. Credit to cash for $9,000
B. Debit to the investment account for $9,000
C. Credit to the investment account for $9,000
D. Credit to a loss account for $9,000
78. Parker Company owns 83% of the outstanding stock of Tadeo Company. Parker Company is referred to as the
A. parent
B. minority interest
C. affiliate
D. subsidiary
79. Gale Company owns 87% of the outstanding stock of Leonardo Company. Leonardo Company is referred to as the
A. parent
B. minority interest
C. affiliate
D. subsidiary
80. Financial statements in which financial data for two or more companies are combined as a single entity are called
A. conventional statements
B. consolidated statements
C. audited statements
D. constitutional statements
