Question 1

What is the appropriate journal entry to record the sale of the 10,000 shares?

Accepted Answer

A)  A Above 
B)  B Above 
C)  C Above 
D)  D Above 
E)  E Above 
A)  A Above 
B)  B Above 
C)  C Above 
D)  D Above 
E)  E Above

Question 2

A company has been using the equity method to account for its investment.The company sells shares and does not continue to have significant influence.Which of the following statements is true?

Accepted Answer

A)  A cumulative effect change in accounting principle must occur. 
B)  A prospective change in accounting principle must occur. 
C)  A retrospective change in accounting principle must occur. 
D)  The investor will not receive future dividends from the investee. 
E)  Future dividends will continue to reduce the investment account. 
A)  A cumulative effect change in accounting principle must occur. 
B)  A prospective change in accounting principle must occur. 
C)  A retrospective change in accounting principle must occur. 
D)  The investor will not receive future dividends from the investee. 
E)  Future dividends will continue to reduce the investment account.

Question 3

What is the Equity in Howell Income that should be reported by Acker in 2017?

Accepted Answer

A)  $10,000. 
B)  $24,000. 
C)  $36,000. 
D)  $38,400. 
E)  $40,000. 
A)  $10,000. 
B)  $24,000. 
C)  $36,000. 
D)  $38,400. 
E)  $40,000.

Question 4

All of the following statements regarding the investment account using the equity method are true except:

Accepted Answer

A)  The investment is recorded at cost. 
B)  Dividends received are reported as revenue. 
C)  Net income of investee increases the investment account. 
D)  Dividends received reduce the investment account. 
E)  Amortization of fair value over cost reduces the investment account. 
A)  The investment is recorded at cost. 
B)  Dividends received are reported as revenue. 
C)  Net income of investee increases the investment account. 
D)  Dividends received reduce the investment account. 
E)  Amortization of fair value over cost reduces the investment account.

Question 5

How much income did Mehan report from Cook during 2018?

Accepted Answer

A)  $90,000. 
B)  $110,000. 
C)  $67,500. 
D)  $87,500. 
E)  $78,750. 
A)  $90,000. 
B)  $110,000. 
C)  $67,500. 
D)  $87,500. 
E)  $78,750.

Question 6

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

Accepted Answer

According to GAAP, when there

Question 7

What is the gain/loss on the sale of the 15,000 shares?

Accepted Answer

A)  $ 0 
B)  $10,000 gain. 
C)  $12,000 loss. 
D)  $15,000 loss. 
E)  $20,000 gain. 
A)  $ 0 
B)  $10,000 gain. 
C)  $12,000 loss. 
D)  $15,000 loss. 
E)  $20,000 gain.

Question 8

Gaw Company owns 15% of the common stock of Trace Corporation and used the fair-value method to account for this investment.Trace reported net income of $110,000 for 2018 and paid dividends of $60,000 on October 1, 2018.How much income should Gaw recognize on this investment in 2018?

Accepted Answer

A)  $16,500. 
B)  $ 9,000. 
C)  $25,500. 
D)  $ 7,500. 
E)  $50,000. 
A)  $16,500. 
B)  $ 9,000. 
C)  $25,500. 
D)  $ 7,500. 
E)  $50,000.

Question 9

What was the balance in the Investment in Nicole Corp.account at December 31, 2018?

Accepted Answer

[$503,000

Question 10

The balance in the investment account at December 31, 2018, is

Accepted Answer

A)  $335,000. 
B)  $355,000. 
C)  $400,000. 
D)  $412,500. 
E)  $480,000. 
A)  $335,000. 
B)  $355,000. 
C)  $400,000. 
D)  $412,500. 
E)  $480,000.

Question 11

For 2018, what is the total amount of excess amortization for Austin's 25% investment in Gainsville?

Accepted Answer

A)  $ 27,500. 
B)  $ 20,000. 
C)  $ 30,000. 
D)  $120,000. 
E)  $ 70,000. 
A)  $ 27,500. 
B)  $ 20,000. 
C)  $ 30,000. 
D)  $120,000. 
E)  $ 70,000.

Question 12

On January 1, 2018, Bangle Company purchased 30% of the voting common stock of Sleat Corp.for $1,000,000.Any excess of cost over book value was assigned to goodwill.During 2018, Sleat paid dividends of $24,000 and reported a net loss of $140,000.What is the balance in the investment account on December 31, 2018?

Accepted Answer

A)  $950,800. 
B)  $958,000. 
C)  $836,000. 
D)  $990,100. 
E)  $956,400. 
A)  $950,800. 
B)  $958,000. 
C)  $836,000. 
D)  $990,100. 
E)  $956,400.

Question 13

How should a permanent loss in value of an investment using the equity method be treated?

Accepted Answer

A)  The equity in investee income is reduced. 
B)  A loss is reported in the same manner as a loss in value of other long-term assets. 
C)  The investor's stockholders' equity is reduced. 
D)  No adjustment is necessary. 
E)  Record an offset to cash. 
A)  The equity in investee income is reduced. 
B)  A loss is reported in the same manner as a loss in value of other long-term assets. 
C)  The investor's stockholders' equity is reduced. 
D)  No adjustment is necessary. 
E)  Record an offset to cash.

Question 14

The balance in the Investment in Sacco account at December 31, 2017, is

Accepted Answer

A)  $100,000. 
B)  $112,000. 
C)  $106,000. 
D)  $107,500. 
E)  $140,000. 
A)  $100,000. 
B)  $112,000. 
C)  $106,000. 
D)  $107,500. 
E)  $140,000.

Question 15

What amount of equity income should Deuce have reported for 2019?

Accepted Answer

A)  $30,000. 
B)  $16,420. 
C)  $38,340. 
D)  $18,000. 
E)  $32,840. 
A)  $30,000. 
B)  $16,420. 
C)  $38,340. 
D)  $18,000. 
E)  $32,840.

Question 16

What is the amount of excess amortization expense for Bailey's investment in Emery for the first year?

Accepted Answer

A)  $ 0. 
B)  $ 84,000. 
C)  $100,000. 
D)  $160,000. 
E)  $400,000. 
A)  $ 0. 
B)  $ 84,000. 
C)  $100,000. 
D)  $160,000. 
E)  $400,000.

Question 17

What journal entry will be recorded at the end of 2018 to defer the recognition of the investor's share of the intra-entity gross profits?

Accepted Answer

A)  Entry A. 
B)  Entry B. 
C)  Entry C. 
D)  Entry D. 
E)  No entry is necessary. 
A)  Entry A. 
B)  Entry B. 
C)  Entry C. 
D)  Entry D. 
E)  No entry is necessary.

Question 18

What amount of equity income would Steven have recognized in 2018 from its ownership interest in Nicole?

Accepted Answer

[($120,000 × .4) - $

Question 19

Charlie Co.owns 30% of the voting common stock of Turf Services Inc.Charlie uses the equity method to account for its investment.On January 1, 2018, the balance in the investment account was $624,000.During 2018, Turf Services reported net income of $120,000 and paid dividends of $30,000.Any excess of fair value over book value is attributable to goodwill with an indefinite life.
What is the balance in the investment account as of December 31, 2018?

Accepted Answer

The answer of Charlie Co.owns 30% of the voting common...

Question 20

What is the appropriate journal entry to record the sale of the 15,000 shares?

Accepted Answer

A)  A Above. 
B)  B Above. 
C)  C Above. 
D)  D Above. 
E)  E Above. 
A)  A Above. 
B)  B Above. 
C)  C Above. 
D)  D Above. 
E)  E Above.

Exam 1: The Equity Method of Accounting for Investments

What is the appropriate journal entry to record the sale of the 10,000 shares?

A company has been using the equity method to account for its investment.The company sells shares and does not continue to have significant influence.Which of the following statements is true?

What is the Equity in Howell Income that should be reported by Acker in 2017?

All of the following statements regarding the investment account using the equity method are true except:

How much income did Mehan report from Cook during 2018?

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

What is the gain/loss on the sale of the 15,000 shares?

Gaw Company owns 15% of the common stock of Trace Corporation and used the fair-value method to account for this investment.Trace reported net income of $110,000 for 2018 and paid dividends of $60,000 on October 1, 2018.How much income should Gaw recognize on this investment in 2018?

What was the balance in the Investment in Nicole Corp.account at December 31, 2018?

The balance in the investment account at December 31, 2018, is

For 2018, what is the total amount of excess amortization for Austin's 25% investment in Gainsville?

How should a permanent loss in value of an investment using the equity method be treated?

The balance in the Investment in Sacco account at December 31, 2017, is

What amount of equity income should Deuce have reported for 2019?

What is the amount of excess amortization expense for Bailey's investment in Emery for the first year?

What journal entry will be recorded at the end of 2018 to defer the recognition of the investor's share of the intra-entity gross profits?

What amount of equity income would Steven have recognized in 2018 from its ownership interest in Nicole?

What is the appropriate journal entry to record the sale of the 15,000 shares?

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

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