Question : 81. In general, consolidated financial statements should be prepared A. when a : 1251429

81. In general, consolidated financial statements should be prepared  
A. when a corporation owns more than 20% of the common stock of another company
B. when a corporation owns more than 50% of the common stock of another company
C. only when a corporation owns 100% of the common stock of another company
D. whenever the market value of the stock investment is significantly lower than its cost

82. An investor purchased 500 shares of common stock, $25 par, for $21,750. Subsequently, 100 shares were sold for $40.50 per share.  What is the amount of gain or loss on the sale? 
A. $4,050 gain
B. $300 gain
C. $300 loss
D. $1,550 gain

83. For accounting purposes, the method used to account for investments in common stock is determined by 
A. the amount paid for the stock by the investor.
B. whether the acquisition of the stock by the investor was “friendly” or “hostile.”
C. the extent of an investor’s influence over the operating and financial affairs of the     investee.
D. whether the stock has paid dividends in past years.

84. When the cost method is used to account for an investment, the carrying value of the investment is affected by 
A. the dividend distributions of the investee.
B. the periodic net income of the investee.
C. the earnings and dividend distributions of the investee.
D. neither the earnings nor the dividends of the investee.

85. The company whose stock is owned by the parent company is called the 
A. controlled company.
B. investee company.
C. subsidiary company.
D. sibling company.

86. If one company owns more than 50% of the common stock of another company 
A. a partnership exists.
B. a 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.

87. Yankton Company began the year without an investment portfolio.  During the year they purchased investments classified as trading securities at a cost of $13,000. At the end of the year, the market value of the securities was $11,000.  The Yankton Company’s financial statements for the current year should show 
A. a loss of $2,000 on the income statement and net trading securities of $13,000 on the balance sheet
B. no loss on the income statement and net trading securities of $13,000 on the balance sheet
C. no loss on the income statement,  net trading securities  of $11,000 and an unrealized loss of $2,000 as a stockholders’ equity adjustment on the balance sheet
D. a loss of $2,000 on the income statement and temporary investments of $11,000 on the balance sheet

88. Yankton Company began the year without an investment portfolio.  During the year they purchased investments classified as available-for-sale securities at a cost of $13,000. At the end of the year, the market value of the securities was $11,000.  The Yankton Company’s financial statements for the current year should show 
A. a loss of $2,000 on the income statement and available-for-sale securities of $13,000 on the balance sheet
B. no loss on the income statement and available-for-sale securities of $13,000 on the balance sheet
C. no loss on the income statement, available-for-sale securities of $11,000 and an unrealized loss of $2,000 as a stockholders’ equity adjustment on the balance sheet
D. a loss of $2,000 on the income statement and temporary investments of $11,000 on the balance sheet

89. The account Unrealized Gain (Loss) on Available-For-Sale Securities should be included in the  
A. Income statement as Other Revenue (Expenses)
B. Balance sheet as an adjustment to the asset account
C. Balance sheet as an adjustment to Stockholders’ Equity
D. Statement of Retained Earnings

90. The account Unrealized Gain (Loss) on Trading Securities should be included in the  
A. Income statement as Other Revenue (Expenses)
B. Balance sheet as an adjustment to the asset account
C. Balance sheet as an adjustment to Stockholders’ Equity
D. Statement of Retained Earnings