江西财经大学高级财务会计国际学院题库chapter02Word格式.docx

江西财经大学高级财务会计国际学院题库chapter02Word格式.docx

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2）Whatmethodofaccountingwillgenerallybeusedwhenonecompanypurchasesbetween20%to50%oftheoutstandingstockofanothercompany?

3）Whichoneofthefollowingitems,originallyrecordedintheInvestmentinFalconCo.accountundertheequitymethod,wouldnotbesystematicallyusedtoreduceinvestmentincomeonaperiodicbasis?

A）Amortizationexpenseofgoodwill

B）Depreciationexpenseontheexcessfairvalueattributedtomachinery

C）Amortizationexpenseontheexcessfairvalueattributedtoleaseagreements

D）Interestexpenseontheexcessfairvalueattributedtolong-termbondspayable

A

LO5

Moderate

4）Whichoneofthefollowingstatementsiscorrectforaninvestorcompany?

A）ThebalanceintheInvestmentinOspreyCo.accountcanbereducedtorepresentadeclineinthefairmarketvalueoftheinvestment,butwillnotbeadjustedifthefairmarketvalueincreases.

B）Undertheequitymethod,thebalanceintheInvestmentinOspreyCo.accountcanbenegativeiftheinvesteecorporationoperatesataloss.

C）OncethebalanceintheInvestmentinOspreyCo.isreducedtozero,itwillnotbereducedanyfurther.

D）Undertheequitymethod,thebalanceintheInvestmentinOspreyCo.accountwillincreasewhencashdividendsarereceived.

LO2

5）PinkertonInc.owns10%ofSableCompany.Inthemostrecentyear,Sablehadnetearningsof$40,000andpaiddividendsof$6,000.Pinkerton'

saccountantmistakenlyassumedPinkertonhadconsiderableinfluenceoverSableandusedtheequitymethodinsteadofthecostmethod.Whatistheimpactontheinvestmentaccountandnetearnings,respectively?

A）Byusingtheequitymethod,theaccountanthasunderstatedtheinvestmentaccountandoverstatedthenetearnings.

B）Byusingtheequitymethod,theaccountanthasoverstatedtheinvestmentaccountandunderstatedthenetearnings.

C）Byusingtheequitymethod,theaccountanthasunderstatedtheinvestmentaccountandunderstatedthenetearnings.

D）Byusingtheequitymethod,theaccountanthasoverstatedtheinvestmentaccountandoverstatedthenetearnings.

D

LO3

6）GriffonIncorporatedholdsa30%ownershipinDuckCorporation.Griffonshouldusetheequitymethodunderwhichofthefollowingcircumstances?

A）GriffonhassurrenderedsignificantstockholderrightsbyagreementbetweenGriffonandDuck.

B）GriffonhasbeenunabletosecureapositionontheDuckCorporation'

sBoardofDirectors.

C）Griffonhasinadequateoruntimelyinformationtoapplytheequitymethod.

D）TheownershipofDuckCorporationisdiverse.

7）PondCorporationusesthefairvaluemethodofaccountingforitsinvestmentinSwanCompany.WhichoneofthefollowingeventswouldaffecttheInvestmentinSwanCo.account?

A）Investeelosses

B）Investeedividendpayments

C）Anincreaseintheinvestee'

ssharepricefromlastperiod

D）AlloftheabovewouldaffecttheInvestmentinSwanCo.account.

8）SadieCorporation'

sstockholders'

equityatDecember31,2010includedthefollowing:

6%Preferredstock,$10parvalue$1,000,000

Commonstock,$1parvalue10,000,000

Otherpaid-incapital—common4,000,000

Retainedearnings4,000,000

$19,000,000

PilgaCorporationpurchaseda30%interestinSadie'

scommonstockfromothershareholdersonJanuary1,2011for$5,800,000.WhatwasthebookvalueofPilga'

sinvestmentinSadieonJanuary1,2011?

A）$5,400,000

B）$5,700,000

C）$7,120,000

D）$7,440,000

Explanation:

A）Totalstockholders'

equity$19,000,000

Less:

preferredequity（1,000,000）

Equals:

commonequity18,000,000

xPilga'

spercentage×

30%

BookvalueofPilgainvestment$5,400,000

9）JabiruCorporationpurchaseda20%interestinFishCompanycommonstockonJanuary1,2008for$300,000.ThisinvestmentwasaccountedforusingthecompleteequitymethodandthecorrectbalanceintheInvestmentinFishaccountonDecember31,2010was$440,000.Theoriginalexcesspurchasetransactionincluded$60,000forapatentamortizedatarateof$6,000peryear.In2011,FishCorporationhadnetincomeof$4,000permonthearneduniformlythroughouttheyearandpaid$20,000ofdividendsinMay.IfJabirusoldone-halfofitsinvestmentinFishonAugust1,2011for$500,000,howmuchgainwasrecognizedonthistransaction?

A）$278,950

B）$280,000

C）$280,950

D）$282,000

C）

Dec31,2010investmentbalance$440,000

Jabiru'

sinterestinFish'

sincomefromJan1-July31:

（$4,000×

7months×

20%）=5,600

Dividends（$20,000×

20%）=（4,000）

Sevenmonthsofpatentamortization:

$500×

7=（3,500）

InvestmentaccountbalanceatJuly31,2011$438,100

Amountreceivedfromsale:

$500,000

Bookvalueofone-halfinterest（219,050）

Gainonsale$280,950

10）Aninvestorusesthecostmethodofaccountingforitsinvestmentincommonstock.Duringthecurrentyear,theinvestorreceived$25,000individends,anamountthatexceededtheinvestor'

sshareoftheinvesteecompany'

sundistributedincomesincetheinvestmentwasacquired.Theinvestorshouldreportdividendincomeofwhatamount?

A）$25,000

B）$25,000lesstheamountinexcessofitsshareofundistributedincomesincetheinvestmentwasacquired

C）$25,000lesstheamountthatisnotinexcessofitsshareofundistributedincomesincetheinvestmentwasacquired

D）Noneoftheaboveiscorrect.

Usethefollowinginformationtoanswerthequestion（s）below.

OnJanuary1,2011,PansyCompanyacquireda10%interestinSunflowerCorporationfor$80,000whenSunflower'

equityconsistedof$400,000capitalstockand$100,000retainedearnings.BookvaluesofSunflower'

snetassetsequaledtheirfairvaluesonthisdate.Sunflower'

snetincomeanddividendsfor2011through2013wereasfollows:

201120122013

Netincome$8,000$10,000$15,000

Dividendspaid5,0005,0005,000

11）AssumethatPansyIncorporatedusedthecostmethodofaccountingforitsinvestmentinSunflower.ThebalanceintheInvestmentinSunfloweraccountatDecember31,2013was

A）$76,700.

B）$80,000.

C）$83,300.

D）$95,000.

B

B）Incomeanddividendsarenotaddedordeductedfromtheinvestmentaccountunderthecostmethodunlessliquidatingdividendsarereceived

12）AssumethatPansyhassignificantinfluenceandusestheequitymethodofaccountingforitsinvestmentinSunflower.ThebalanceintheInvestmentinSunfloweraccountatDecember31,2013was

A）$78,200.

C）$81,800.

D）$83,300.

InitialInvestmentinSunflower$80,000

adjustments:

2011:

10%×

（$8,000-$5,000）=300

2012:

（$10,000-$5,000）=500

2013:

（$15,000-$5,000）=1,000

Investmentbalanceat12/31/2013:

$81,800

13）PymingCorporationaccountsforits40%investmentinSillabogCompanyusingtheequitymethod.Onthedateoftheoriginalinvestment,fairvalueswereequaltothebookvaluesexceptforapatent,whichcostPyminganadditional$40,000.Thepatenthadanestimatedlifeof10years.Sillaboghasasteadynetincomeof$20,000peryearandconsistentlypaysout40%ofitsnetincomeasdividendstoitsshareholders.Whichoneofthefollowingstatementsiscorrect?

A）Thenetchangeintheinvestmentaccountforeachfullyearwillbeadebitof$8,000.

B）Thenetchangeintheinvestmentaccountforeachfullyearwillbeadebitof$4,800.

C）Thenetchangeintheinvestmentaccountforeachfullyearwillbeadebitof$800.

D）Thenetchangeintheinvestmentaccountforeachfullyearwillbeacreditof$800.

14）JacanaCorporationpaid$200,000fora25%interestinLilypadCorporation'

scommonstockonJanuary1,2010,butwasnotabletoexercisesignificantinfluenceoverLilypad.During2011,Jacanareportedincomeof$120,000,excludingitsincomefromLilypad,andpaiddividendsof$50,000.Lilypadreportednetincomeof$40,000during2011andpaiddividendsof$20,000.Jacanashouldreportnetincomefor2011intheamountof

A）$115,000.

B）$120,000.

C）$125,000.

D）$130,000.

Jacana'

sseparateincome$120,000

DividendincomefromLilypad

equals$20,000×

25%=5,000

snetincome=$125,000

LO4

15）PandaCorporationpurchased100,000previouslyunissuedsharesofSkunkCompany'

s$10parvaluecommonstockdirectlyfromS