Question 1

The income reported by Dodge for 2017 with regard to the Gates investment is

Accepted Answer

A)  $ 7,500. 
B)  $ 22,500. 
C)  $ 15,000. 
D)  $100,000. 
E)  $150,000. 
A)  $ 7,500. 
B)  $ 22,500. 
C)  $ 15,000. 
D)  $100,000. 
E)  $150,000.

Question 2

How much goodwill is associated with this investment?

Accepted Answer

A)  $(500,000). 
B)  $ 0. 
C)  $ 100,000. 
D)  $ 200,000. 
E)  $2,000,000. 
A)  $(500,000). 
B)  $ 0. 
C)  $ 100,000. 
D)  $ 200,000. 
E)  $2,000,000.

Question 3

The income reported by Dodge for 2018 with regard to the Gates investment is

Accepted Answer

A)  $80,000. 
B)  $30,000. 
C)  $50,000. 
D)  $15,000. 
E)  $75,000. 
A)  $80,000. 
B)  $30,000. 
C)  $50,000. 
D)  $15,000. 
E)  $75,000.

Question 4

What is the balance in the investment account for the 15% ownership interest, at January 1, 2018?

Accepted Answer

A)  $150,000. 
B)  $172,500. 
C)  $180,000. 
D)  $157,500. 
E)  $170,000 
A)  $150,000. 
B)  $172,500. 
C)  $180,000. 
D)  $157,500. 
E)  $170,000

Question 5

How much income did Mehan report from Cook during 2017?

Accepted Answer

A)  $30,000. 
B)  $22,500. 
C)  $ 7,500. 
D)  $ 0. 
E)  $50,000. 
A)  $30,000. 
B)  $22,500. 
C)  $ 7,500. 
D)  $ 0. 
E)  $50,000.

Question 6

On January 2, 2018, Heinreich Co.paid $500,000 for 25% of the voting common stock of Jones Corp.At the time of the investment, Jones had net assets with a book value and fair value of $1,800,000.During 2018, Jones incurred a net loss of $60,000 and paid dividends of $100,000.Any excess cost over book value is attributable to goodwill with an indefinite life.
Required:
1) Prepare a schedule to show the amount of goodwill from Heinrich's investment in Jones.
2) Prepare a schedule to show the balance in Heinreich's investment account at December 31, 2018.

Accepted Answer

The answer of On January 2, 2018, Heinreich Co.paid $500,000...

Question 7

What is the primary objective of the fair value method of accounting for an investment?

Accepted Answer

The investor possesses only a small perc

Question 8

An investor should always use the equity method to account for an investment if:

Accepted Answer

A)  It has the ability to exercise significant influence over the operating policies of the investee. 
B)  It owns 30% of an investee's stock. 
C)  It has a controlling interest (more than 50%) of an investee's stock. 
D)  The investment was made primarily to earn a return on excess cash. 
E)  It does not have the ability to exercise significant influence over the operating policies of the investee. 
A)  It has the ability to exercise significant influence over the operating policies of the investee. 
B)  It owns 30% of an investee's stock. 
C)  It has a controlling interest (more than 50%) of an investee's stock. 
D)  The investment was made primarily to earn a return on excess cash. 
E)  It does not have the ability to exercise significant influence over the operating policies of the investee.

Question 9

The equity in income of Sacco for 2018, is

Accepted Answer

A)  $22,500. 
B)  $21,000. 
C)  $12,000. 
D)  $13,500. 
E)  $75,000. 
A)  $22,500. 
B)  $21,000. 
C)  $12,000. 
D)  $13,500. 
E)  $75,000.

Question 10

Wathan Inc.sold $180,000 in inventory to Miller Co.during 2017, for $270,000.Miller resold $108,000 of this merchandise in 2017 with the remainder to be disposed of during 2018.
Required:
Assuming Wathan owns 25% of Miller and applies the equity method, prepare the journal entry Wathan should have recorded at the end of 2017 to defer gross profit on intra-entity inventory sales.

Accepted Answer

The answer of Wathan Inc.sold $180,000 in inventory to Miller...

Question 11

On January 1, 2018, Jordan Inc.acquired 30% of Nico Corp.Jordan used the equity method to account for the investment.On January 1, 2019, Jordan sold two-thirds of its investment in Nico.It no longer had the ability to exercise significant influence over the operations of Nico.How should Jordan account for this change?

Accepted Answer

A)  Jordan should continue to use the equity method to maintain consistency in its financial statements. 
B)  Jordan should restate the prior years' financial statements and change the balance in the investment account as if the fair-value method had been used since 2018. 
C)  Jordan has the option of using either the equity method or the fair-value method for 2018 and future years. 
D)  Jordan should report the effect of the change from the equity to the fair-value method as a retrospective change in accounting principle. 
E)  Jordan should use the fair-value method for 2019 and future years, but should not make a retrospective adjustment to the investment account. 
A)  Jordan should continue to use the equity method to maintain consistency in its financial statements. 
B)  Jordan should restate the prior years' financial statements and change the balance in the investment account as if the fair-value method had been used since 2018. 
C)  Jordan has the option of using either the equity method or the fair-value method for 2018 and future years. 
D)  Jordan should report the effect of the change from the equity to the fair-value method as a retrospective change in accounting principle. 
E)  Jordan should use the fair-value method for 2019 and future years, but should not make a retrospective adjustment to the investment account.

Question 12

What is the balance in Jackie Corp's Investment in Rob Co.account at December 31, 2018?

Accepted Answer

A)  $2,000,000. 
B)  $2,005,000. 
C)  $2,060,000. 
D)  $2,090,000. 
E)  $2,200,000. 
A)  $2,000,000. 
B)  $2,005,000. 
C)  $2,060,000. 
D)  $2,090,000. 
E)  $2,200,000.

Question 13

How would a change be made from the equity method to the fair value method of accounting for investments?

Accepted Answer

A change to the fair value method is app

Question 14

What is the amount of the excess of purchase price over book value?

Accepted Answer

A)  $(1,000,000.) 
B)  $ 400,000. 
C)  $ 800,000. 
D)  $ 1,000,000. 
E)  $ 1,100,000. 
A)  $(1,000,000.) 
B)  $ 400,000. 
C)  $ 800,000. 
D)  $ 1,000,000. 
E)  $ 1,100,000.

Question 15

How much income did Harley report from Bike for 2018?

Accepted Answer

A)  $120,000. 
B)  $200,000. 
C)  $300,000. 
D)  $320,000. 
E)  $500,000. 
A)  $120,000. 
B)  $200,000. 
C)  $300,000. 
D)  $320,000. 
E)  $500,000.

Question 16

Which statement is true concerning unrecognized profits in intra-entity inventory sales when an investor uses the equity method?

Accepted Answer

A)  The investee must defer upstream ending inventory profits. 
B)  The investee must defer upstream beginning inventory profits. 
C)  The investor must defer downstream ending inventory profits. 
D)  The investor must defer downstream beginning inventory profits. 
E)  The investor must defer upstream beginning inventory profits. 
A)  The investee must defer upstream ending inventory profits. 
B)  The investee must defer upstream beginning inventory profits. 
C)  The investor must defer downstream ending inventory profits. 
D)  The investor must defer downstream beginning inventory profits. 
E)  The investor must defer upstream beginning inventory profits.

Question 17

What is the Equity in Howell Income that should be reported by Acker in 2018?

Accepted Answer

A)  $32,000. 
B)  $41,600. 
C)  $48,000. 
D)  $49,600. 
E)  $50,600. 
A)  $32,000. 
B)  $41,600. 
C)  $48,000. 
D)  $49,600. 
E)  $50,600.

Question 18

What is the balance in Cayman's Investment in Maya account at December 31, 2018?

Accepted Answer

A)  $463,500. 
B)  $467,100. 
C)  $468,000. 
D)  $468,900. 
E)  $480,000. 
A)  $463,500. 
B)  $467,100. 
C)  $468,000. 
D)  $468,900. 
E)  $480,000.

Question 19

How much of Cook's net income did Mehan report for the year 2019?

Accepted Answer

A)  $61,750. 
B)  $81,250. 
C)  $72,500. 
D)  $59,250. 
E)  $75,000. 
A)  $61,750. 
B)  $81,250. 
C)  $72,500. 
D)  $59,250. 
E)  $75,000.

Question 20

Jarmon Company owns twenty-three percent (23%) of the voting common stock of Kaleski Corp.Jarmon does not have the ability to exercise significant influence over the operations of Kaleski.What method should Jarmon use to account for its investment in Kaleski?

Accepted Answer

The fair-value method should be used. Ge

Exam 1: The Equity Method of Accounting for Investments

The income reported by Dodge for 2017 with regard to the Gates investment is

How much goodwill is associated with this investment?

The income reported by Dodge for 2018 with regard to the Gates investment is

What is the balance in the investment account for the 15% ownership interest, at January 1, 2018?

How much income did Mehan report from Cook during 2017?

What is the primary objective of the fair value method of accounting for an investment?

An investor should always use the equity method to account for an investment if:

The equity in income of Sacco for 2018, is

What is the balance in Jackie Corp's Investment in Rob Co.account at December 31, 2018?

How would a change be made from the equity method to the fair value method of accounting for investments?

What is the amount of the excess of purchase price over book value?

How much income did Harley report from Bike for 2018?

Which statement is true concerning unrecognized profits in intra-entity inventory sales when an investor uses the equity method?

What is the Equity in Howell Income that should be reported by Acker in 2018?

What is the balance in Cayman's Investment in Maya account at December 31, 2018?

How much of Cook's net income did Mehan report for the year 2019?

Jarmon Company owns twenty-three percent (23%) of the voting common stock of Kaleski Corp.Jarmon does not have the ability to exercise significant influence over the operations of Kaleski.What method should Jarmon use to account for its investment in Kaleski?

A: the Equity Method of Accounting for Investments

Consolidation of Financial Information

A: Consolidation of Financial Information

Consolidations - Subsequent to the Date of Acquisition

A: Consolidations - Subsequent to the Date of Acquisition

Consolidated Financial Statements and Outside Ownership

A: Consolidated Financial Statements and Outside Ownership

Consolidated Financial Statements Intra-Entity Asset Transactions

A: Consolidated Financial Statements Intra-Entity Asset Transactions

Variable Interest Entities, Intra-Entity Debt, Consolidated Cash Flows, and Other Issues

A: Variable Interest Entities, Intra-Entity Debt, Consolidated Cash Flows, and Other Issues

Consolidated Financial Statements - Ownership Patterns and Income Taxes

A: Consolidated Financial Statements - Ownership Patterns and Income Taxes

Segment and Interim Reporting

A: Segment and Interim Reporting

Foreign Currency Transactions and Hedging Foreign Exchange Risk

A: Foreign Currency Transactions and Hedging Foreign Exchange Risk

Translation of Foreign Currency Financial Statements

A: Translation of Foreign Currency Financial Statements

Worldwide Accounting Diversity and International Accounting Standards

A: Worldwide Accounting Diversity and International Accounting Standards

Financial Reporting and the Securities and Exchange Commission

A: Financial Reporting and the Securities and Exchange Commission

Accounting for Legal Reorganizations and Liquidations

A: Accounting for Legal Reorganizations and Liquidations

Partnerships: Formation and Operation

A: Partnerships: Formation and Operation

Partnerships: Termination and Liquidation

A: Partnerships: Termination and Liquidation

Accounting for State and Local Governments, Part I

A: Accounting for State and Local Governments, Part I

Accounting for State and Local Governments, Part II

A: Accounting for State and Local Governments, Part II

Accounting for Not-For-Profit Entities

A: Accounting for Not-For-Profit Entities

Accounting for Estates and Trusts

A: Accounting for Estates and Trusts

Filters