Advanced Accounting Quiz
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 2011 and paid dividends of $60,000 on October 1, 2011. How much income should Gaw recognize on this investment in 2011?
Choose one answer. a. $9,000. b. $16,500. c. $7,500. d. $50,000. e. $25,500.
Correct
Marks for this submission: 1/1.
Question 2
Marks: 1
An upstream sale of inventory is a sale:
Choose one answer. a. with the transfer of goods scheduled by contract to occur on a specified future date. b. between subsidiaries owned by a common parent. c. made by the investor to the investee. d. made by the investee to the investor. e. in which the goods are physically transported by boat from a subsidiary to its parent.
Correct
Marks for this submission: 1/1.
Question 3
Marks: 1
All of the following statements regarding the investment account using the equity method are true except:
Choose one answer. a. Net income of investee increases the investment account. b. Dividends received reduce the investment account. c. Dividends received are reported as revenue. d. The investment is recorded at cost. e. Amortization of fair value over cost reduces the investment account.
Correct
Marks for this submission: 1/1.
Question 4
Marks: 1
An investee company incurs an extraordinary loss during the period. The investor appropriately applies the equity method. Which of the following statements is true?
Choose one answer. a. The extraordinary loss would reduce the value of the investment. b. The extraordinary loss should increase equity in investee income. c. The extraordinary loss would not appear on the income statement but would be a component of comprehensive income. d. The loss would be ignored but shown in the investor's notes to the financial statements.
Choose one answer. a. $9,000. b. $16,500. c. $7,500. d. $50,000. e. $25,500.
Correct
Marks for this submission: 1/1.
Question 2
Marks: 1
An upstream sale of inventory is a sale:
Choose one answer. a. with the transfer of goods scheduled by contract to occur on a specified future date. b. between subsidiaries owned by a common parent. c. made by the investor to the investee. d. made by the investee to the investor. e. in which the goods are physically transported by boat from a subsidiary to its parent.
Correct
Marks for this submission: 1/1.
Question 3
Marks: 1
All of the following statements regarding the investment account using the equity method are true except:
Choose one answer. a. Net income of investee increases the investment account. b. Dividends received reduce the investment account. c. Dividends received are reported as revenue. d. The investment is recorded at cost. e. Amortization of fair value over cost reduces the investment account.
Correct
Marks for this submission: 1/1.
Question 4
Marks: 1
An investee company incurs an extraordinary loss during the period. The investor appropriately applies the equity method. Which of the following statements is true?
Choose one answer. a. The extraordinary loss would reduce the value of the investment. b. The extraordinary loss should increase equity in investee income. c. The extraordinary loss would not appear on the income statement but would be a component of comprehensive income. d. The loss would be ignored but shown in the investor's notes to the financial statements.