Question :
110.On July 31, Potter Co. purchased 2,000 shares of GigaTech : 1258215
110.On July 31, Potter Co. purchased 2,000 shares of GigaTech stock for $16,000. The investment is classified as available-for-sale securities. On October 31, which is Potter’s year-end, the stock had a fair value of $20,000. Potter should record a:
A. Credit to Unrealized Gain-Equity for $4,000.
B. Credit to Market Adjustment—Available-for-Sale for $4,000.
C. Credit to Investment Revenue for $4,000.
D. Debit to Unrealized Loss-Equity for $4,000.
E. Debit to Unrealized Gain-Equity for $4,000.
111.On March 15, Alan Company purchased 10,000 shares of Cameo Corp. stock for $35,000. The investment is classified as available-for-sale securities. On June 30, the stock had a fair value of $34,000. Alan should do which of the following:
A. Record a decrease to the Fair value Adjustment-AFS account.
B. Record an increase to the Unrealized Loss—Equity account.
C. Report a decrease in the Gain on Sale of Investment income statement account.
D. Report an increase in the asset section of the balance sheet.
E. Record an increase to the Unrealized Gain—Income account.
112.If a company owns more than 20% of the stock of another company and the stock is being held as a long-term investment, which method would the investor normally use to account for this investment?
A. Equity method.
B. Fair value method.
C. Historical cost method.
D. Cost with amortization method.
E. Effective method.
113.MotorCity, Inc. purchased 40,000 shares of Shaw common stock for $232,000. This represents 40% of the outstanding stock. The entry to record the transaction includes a:
A. Debit to Long-Term Investments for $92,800.
B. Debit to Long-Term Investments for $232,000.
C. Credit to Long-Term Investments for $92,800.
D. Debit to Long-Term Investments-HTM for $232,000.
E. Debit to Short-Term Investment-AFS for $232,000.
114.Segmental Manufacturing owns 35% of Glesson Corp. stock. Glesson pays a total of $47,000 in cash dividends for the period. Segmental’s entry to record the dividend transaction would include a:
A. Credit to Long-Term Investments for $16,450.
B. Debit to Long-Term Investments for $16,450.
C. Debit to Cash for $47,000.
D. Credit to Cash for $16,450.
E. Credit to Investment Revenue for $47,000.
115.Zhang Corp. owns 40% of Magnor Company’s common stock. Magnor pays $97,000 in total cash dividends to its shareholders. Zhang’s entry to record this transaction should include a:
A. Debit to Dividends for $97,000.
B. Debit to Dividends for $38,800.
C. Debit to Long-Term investments for $97,000.
D. Credit to Long-Term Investments for $38,800.
E. Credit to Cash for $97,000.
116.McVeigh Corp. owns 40% of Gondor Company’s common stock. McVeigh received $41,200 in cash dividends from Gondor. The entry to record this transaction should include a:
A. Debit to Dividends for $103,000.
B. Credit to Long-Term Investments for $41,200.
C. Debit to Dividend Revenue for $41,200.
D. Credit to Long-Term Investments for $103,000.
E. Credit to Cash for $41,200.
117.Marjam Company owns 51,000 shares of MacKenzie Company’s 100,000 outstanding shares of common stock. MacKenzie Company pays $25,000 in total cash dividends to its shareholders. Marjam’s entry to record this transaction should include a:
A. Debit to Dividend Revenue for $12,750.
B. Debit to Interest Revenue for $12,750.
C. Credit to Long-Term investments for $12,750.
D. Credit to Long-Term Investments for $25,000.
E. Credit to Dividend Revenue for $25,000.
118.Bharrat Corporation purchased 40% of Ferris Corporation for $100,000 on January 1. On October 17 of the same year, Ferris Corporation declared total cash dividends of $12,000. At year-end, Ferris Corporation reported net income of $60,000. The balance in the Bharrat Corporation’s Long-Term Investment-Ferris account at December 31 should be:
A. $80,800.
B. $100,000.
C. $95,200.
D. $119,200.
E. $124,000.
119.Madison Corporation purchased 40% of Jay Corporation for $125,000 on January 1. On June 20 of the same year, Jay Corporation declared total cash dividends of $30,000. At year-end, Jay Corporation reported net income of $150,000. The balance in Madison Corporation’s Long-Term Investment-Jay Corporation account as of December 31 should be:
A. $77,000.
B. $125,000.
C. $173,000.
D. $197,000.
E. $370,000.
