i. The X Company recently acquired 100% of the shares of the Y Company. X Company paid lawyers and appraisers for assistance in negotiating and finalizing this transaction. How should X account for these costs on the separate entity financial statements?

a. Deferred Charges

b. Profession fees expense

c. Additional cost of the investment in Y

d. Goodwill

B

ii. Which of the following statements best describes a joint venture?

a. Two previously established businesses come together as if they had always been together

b. Must be enacted through an exchange of shares

c. Earnings are distributed based on share earnings

d. Must be established through a cash transaction or the contribution of other assets.

iii. X Ltd. owns 80% of the common shares of Y Inc. The investment account under the equity method is made up of the following:-

80% of Y’s shareholders’ equity……………………………………………………$560,000

Unamortized fair value excess………………………………………………………. 140,000

Goodwill………………………………………………………………………………………..200,000

900,000

X sells ¼ of its investments in Y for $300,000. What is the amount of the gain or loss related to this sale that X would report ?

a. Zero

b. $18,750

c. $75,000

d. $160,000.

iv. On January 1^st.2019, X Company invested $100,000 for 15% of the common shares of the Y Company. X accounted for its long-term investment using the cost method. Y reported net income of $80,000 and declared a dividend of $90,000 during 2019. At the end of 2019 the market value of the common shares of Y had declined and X’s holding of common shares was worth $95,000 at this date.

What would be the balance in the investment in Y that X would report on its 2019 Balance Sheet?

a. $85,000

b. $100,000

c. $112,000

d. $87,000

Answer rating: 100% (QA)

i c All the expenses related to investment will be capit... View the full answer