Multiple Choice Questions 1. Refer to the information for Shackley above. Assume that one of the securities

Question:

Multiple Choice Questions
1. Refer to the information for Shackley above. Assume that one of the securities was solely responsible for the $ 600 unrealized loss and was responsible for $ 150 of the income. If Shackley bought that security for $ 3,500, what is the value of the security on the year-end balance sheet?
a. $ 3,500
b. $ 3,050
c. $ 3,650
d. $ 2,900
2. JFK Inc. buys 30 percent of the shares outstanding for KLN Company. What account will JFK debit?
a. Trading Securities
b. Available-for-Sale Securities
c. Investments – Equity Method
d. Investments
3. Whopper owns a 40 percent interest in BigMac which it purchased for $ 2.5 million. During fiscal year 2012, BigMac paid cash dividends of $ 50,000 and reported net income of $ 700,000. What is the value of Whopper’s investment in BigMac reported on its 2012 balance sheet?
a. $ 3,150,000
b. $ 2,500,000
c. $ 2,760,000
d. $ 2,450,000
4. When the market value of a company’s available-for-sale securities is lower than its cost, the difference should be:
a. Shown as a liability.
b. Shown as a valuation allowance subtracted from the historical cost of the investments. c. Shown as a valuation allowance added to the historical cost of the investments.
d. No entry is made the securities are shown at historical cost.
5. What account title will not appear on consolidated
a. Inventory
b. Investment in EBL (80% ownership)
c. Investment in MJK (35% ownership)
d.
6. Consolidated are required:
a. Whenever the of another is owned.
b. Only when significant influence or control can be exerted over another company.
c. When over 50 percent of the of another is owned.
d. Only when 100 percent of the of another is owned.
7. Assume a parent has total assets of $ 6,000,000 and a subsidiary has total assets of $ 4,000,000. If the parent owns 70 percent of the subsidiary’s common stock, what amount of total assets will be reported on the consolidated balance sheet?
a. $ 0, consolidation is not necessary
b. $ 6,000,000
c. $ 7,000,000
d. $ 10,000,000
8. is calculated as the excess of the cost of an acquired company over the:
a. Book value of net assets acquired.
b. Fair value of assets acquired.
c. Fair value of identifiable net assets acquired.
d. Book value of identifiable net assets acquired.
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