Question :
41. Gilman Company purchased 100,000 of the 250,000 shares of common : 1228452
41. Gilman Company purchased 100,000 of the 250,000 shares of common stock of Burke Corporation on January 1, 2010, at $40 per share as a long-term investment. The records of Burke Corporation showed the following on December 31, 2010:
How much should Gilman Company report as investment income from the Burke investment during 2010?
A. $230,000
B. $218,000
C. $12,000
D. $30,000
2010 investment income ($230,000) = Proportionate share of Burke’s net income ($575,000 ? 100,000/250,000)
42. On January 1, 2010, Entertainment Company acquired 15% of the outstanding voting stock of Rocker Company as a long-term investment in available-for-sale securities. During 2010, Rocker Company reported net income of $1,500,000 and dividends declared and paid of $250,000. How much income will be reported during 2010 from the Rocker investment?
A. $225,000
B. $37,500
C. $187,500
D. $250,000
2010 investment (dividend) income ($37,500) = Proportionate share of Rocker’s dividends ($250,000 ? .15)
43. Which of the following statements is correct?
A. Any unrealized holding gain or loss on investments in trading securities is reported on the income statement.
B. Any unrealized holding gain or loss on investments in available-for-sale securities is reported on the income statement.
C. All unrealized gains and losses are reported on the income statement regardless of the method used to account for the investment.
D. Any unrealized holding gain or loss on investments in trading securities or in available-for-sale securities is reported on the income statement.
44. Lyrical Company purchased equity securities for $500,000 and classified them as trading securities on September 15, 2010. On December 31, 2010, the current market value of the securities was $481,000. How should the investment be reported within the 2010 financial statements?
A. The investment in trading securities would be reported in the balance sheet at its $481,000 market value.
B. The investment in trading securities would be reported in the balance sheet at its $500,000 cost.
C. A realized holding loss on the trading securities would be reported on the income statement.
D. The investment in trading securities would be reported in the balance sheet at its $481,000 market value and a realized holding loss on the trading securities would be reported on the income statement.
45. Libby Company purchased equity securities for $100,000 and classified them as available-for-sale securities on September 15, 2010. At December 31, 2010, the current market value of the securities was $105,000. How should the investment be reported in the 2010 financial statements?
A. The investment in available-for-sale securities would be reported on the balance sheet at its $100,000 cost.
B. The $5,000 unrealized gain is reported within the income statement.
C. The $5,000 realized gain is reported within the income statement.
D. The investment in available for sale securities would be reported in the balance sheet at its $105,000 market value and an unrealized holding gain on available-for-sale securities would be reported in the stockholders’ equity section of the balance sheet.
46. On January 1, 2010, Short Company purchased as an available-for-sale investment, 20,000 shares (15% of the outstanding voting shares) of Daniel Corporation’s $1 par value common stock at a cost of $50 per share. During November 2010, Daniel declared and paid a cash dividend of $2 per share. At December 31, 2010, end of the accounting period, Daniel’s shares were selling at $48. The 2010 financial statements for Short Company should report the following amounts:
A. Option A
B. Option B
C. Option C
D. Option D
47. JDR Company purchased 40% of the common stock of YRK Corporation on January 1, 2010, for $2,000,000 as a long-term investment. The records of YRK Corporation showed the following on December 31, 2010:
At what amount should JDR report the YRK investment on the December 31, 2010 balance sheet?
A. $2,116,000
B. $2,000,000
C. $4,124,000
D. $2,108,000
48. JDR Company purchased 40% of the common stock of YRK Corporation on January 1, 2010, for $2,000,000 as a long-term investment. The records of YRK Corporation showed the following on December 31, 2010:
How much investment income should JDR report from the YRK investment during 2010?
A. $290,000
B. $30,000
C. $116,000
D. $12,000
2010 investment income ($116,000) = Proportionate share of YRK’s net income ($290,000 ? 40%)
49. On July 1, 2010, as a long-term investment in available-for-sale securities, Wildlife Supply Company purchased 6,000 shares of the preferred stock (nonvoting) of Nature Company for $30 per share (18,000 shares outstanding). The records of Nature Company reflect the following:
The amount reported on the balance sheet by Wildlife Company for its investment at December 31, 2010 would be which of the following?
A. $160,000
B. $162,000
C. $182,000
D. $200,000
50. On July 1, 2010, Surf Company purchased long-term investments in available-for-sale securities as follows:
Blue Corporation common stock (par $5) 2,000 shares at $16 per share.
Black Company preferred stock (par $20) 1,500 shares at $30 per share.
The quoted market prices per share on December 31, 2010 were as follows:
Blue Corporation stock, $15 per share
Black Company stock, $30 per share
Each of the long-term investments represents 10% of the total shares outstanding. The combined carrying value of the long-term investments reported in the balance sheet at December 31, 2010 would be which of the following?
A. $77,000
B. $73,500
C. $71,500
D. $75,000
