Question 1

On Deuce's December 31, 2019 balance sheet, what balance was reported for the Investment in Wiz Co.account?

Accepted Answer

A)  $117,000. 
B)  $143,400. 
C)  $152,000. 
D)  $134,400. 
E)  $141,200. 
A)  $117,000. 
B)  $143,400. 
C)  $152,000. 
D)  $134,400. 
E)  $141,200.

Question 2

Aqua Corp.purchased 30% of the common stock of Marcus Co.by paying $500,000.Of this amount, $50,000 is associated with goodwill.
Required:
Prepare the journal entry to record Aqua's investment.

Accepted Answer

The answer of Aqua Corp.purchased 30% of the common stock...

Question 3

What is the gain/loss on the sale of the 10,000 shares?

Accepted Answer

A)  $20,000 gain. 
B)  $10,000 gain. 
C)  $1,000 gain. 
D)  $1,000 loss. 
E)  $10,000 loss. 
A)  $20,000 gain. 
B)  $10,000 gain. 
C)  $1,000 gain. 
D)  $1,000 loss. 
E)  $10,000 loss.

Question 4

What argument could be made against the equity method?

Accepted Answer

An argument could be made against the re

Question 5

The amount allocated to goodwill at January 1, 2017, is

Accepted Answer

A)  $25,000. 
B)  $13,000 
C)  $ 9,000. 
D)  $16,000. 
E)  $10,000. 
A)  $25,000. 
B)  $13,000 
C)  $ 9,000. 
D)  $16,000. 
E)  $10,000.

Question 6

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 7

Which of the following results in a decrease in the investment account when applying the equity method?

Accepted Answer

A)  Dividends paid by the investor. 
B)  Net income of the investee. 
C)  Net income of the investor. 
D)  Share of gross profit on intra-entity inventory sales for the current year. 
E)  Purchase of additional common stock by the investor during the current year. 
A)  Dividends paid by the investor. 
B)  Net income of the investee. 
C)  Net income of the investor. 
D)  Share of gross profit on intra-entity inventory sales for the current year. 
E)  Purchase of additional common stock by the investor during the current year.

Question 8

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 9

What is the balance in the investment account on December 31, 2018?

Accepted Answer

A)  $1,900,000. 
B)  $1,960,000. 
C)  $2,000,000. 
D)  $2,016,000. 
E)  $2,028,000. 
A)  $1,900,000. 
B)  $1,960,000. 
C)  $2,000,000. 
D)  $2,016,000. 
E)  $2,028,000.

Question 10

Idler Co.has an investment in Cowl Corp.for which it uses the equity method.Cowl has suffered large losses for several years, and the balance in the investment account has been reduced to zero.How should Idler account for this investment?

Accepted Answer

Idler should discontinue the u

Question 11

Which of the following results in an increase in the investment account when applying the equity method?

Accepted Answer

A)  Investor's share of gross profit from intra-entity inventory sales for the prior year. 
B)  Investor's share of gross profit from intra-entity inventory sales for the current year. 
C)  Dividends paid by the investor. 
D)  Dividends paid by the investee. 
E)  Sale of a portion of the investment during the current year. 
A)  Investor's share of gross profit from intra-entity inventory sales for the prior year. 
B)  Investor's share of gross profit from intra-entity inventory sales for the current year. 
C)  Dividends paid by the investor. 
D)  Dividends paid by the investee. 
E)  Sale of a portion of the investment during the current year.

Question 12

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 13

What is the balance in Cayman's Investment in Maya account at December 31, 2019?

Accepted Answer

A)  $488,700. 
B)  $489,600. 
C)  $492,000. 
D)  $494,400. 
E)  $514,500. 
A)  $488,700. 
B)  $489,600. 
C)  $492,000. 
D)  $494,400. 
E)  $514,500.

Question 14

What was the balance in the investment account before the shares were sold?

Accepted Answer

A)  $1,560,000. 
B)  $1,600,000. 
C)  $1,700,000. 
D)  $1,800,000. 
E)  $1,860,000. 
A)  $1,560,000. 
B)  $1,600,000. 
C)  $1,700,000. 
D)  $1,800,000. 
E)  $1,860,000.

Question 15

What is the balance in the investment account after the sale of the 10,000 shares?

Accepted Answer

A)  $390,000. 
B)  $420,000. 
C)  $453,000. 
D)  $454,000. 
E)  $465,000. 
A)  $390,000. 
B)  $420,000. 
C)  $453,000. 
D)  $454,000. 
E)  $465,000.

Question 16

What journal entry will be recorded in 2019 to recognize its share of the intra-entity gross profit that was deferred in 2018?

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 17

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 18

What is the investor's share of gross profit on intra-entity inventory sales that should be deferred on December 31, 2019?

Accepted Answer

A)  $1,500. 
B)  $2,400. 
C)  $3,600. 
D)  $4,000. 
E)  $8,000. 
A)  $1,500. 
B)  $2,400. 
C)  $3,600. 
D)  $4,000. 
E)  $8,000.

Question 19

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

Accepted Answer

The objective of the equity method is to

Question 20

How much is the adjustment to the Investment in Stanley Corporation for the change from the fair-value method to the equity method on January 1, 2018?

Accepted Answer

A)  A debit of $16,500. 
B)  A debit of $21,500. 
C)  A debit of $90,000. 
D)  A debit of $165,000. 
E)  There is no adjustment. 
A)  A debit of $16,500. 
B)  A debit of $21,500. 
C)  A debit of $90,000. 
D)  A debit of $165,000. 
E)  There is no adjustment.

Exam 1: A: the Equity Method of Accounting for Investments

On Deuce's December 31, 2019 balance sheet, what balance was reported for the Investment in Wiz Co.account?

Aqua Corp.purchased 30% of the common stock of Marcus Co.by paying $500,000.Of this amount, $50,000 is associated with goodwill. Required: Prepare the journal entry to record Aqua's investment.

What is the gain/loss on the sale of the 10,000 shares?

What argument could be made against the equity method?

The amount allocated to goodwill at January 1, 2017, is

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

Which of the following results in a decrease in the investment account when applying the equity method?

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

What is the balance in the investment account on December 31, 2018?

Idler Co.has an investment in Cowl Corp.for which it uses the equity method.Cowl has suffered large losses for several years, and the balance in the investment account has been reduced to zero.How should Idler account for this investment?

Which of the following results in an increase in the investment account when applying the equity method?

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

What is the balance in Cayman's Investment in Maya account at December 31, 2019?

What was the balance in the investment account before the shares were sold?

What is the balance in the investment account after the sale of the 10,000 shares?

What journal entry will be recorded in 2019 to recognize its share of the intra-entity gross profit that was deferred in 2018?

What is the investor's share of gross profit on intra-entity inventory sales that should be deferred on December 31, 2019?

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

How much is the adjustment to the Investment in Stanley Corporation for the change from the fair-value method to the equity method on January 1, 2018?

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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