ADMS 2510 Study Guide - Comprehensive Income, Net Income, Current Liability
ADMS 2510 Full Course Notes
Document Summary
Get access
Related Documents
Related Questions
Can someone please help me with the following questions so I candouble check my work? No explanation needed just the answer isfine.
8. U.S. GAAP and IFRS require firms to account for minority,active investments, generally those where the investor owns between_____ using the equity method. Under the equity method, theinvestor recognizes as revenue (expense) each period its share ofthe net income (loss) of the investee. The investor recognizesdividends received from the investee as a return (reduction) ofinvestment, not as income.
a. | 10% and 50% |
b. | 20% and 50% |
c. | 30% and 50% |
d. | 40% and 60% |
e. | 50% and 60% |
25. Purchaser Corporation acquires 30%of the outstanding voting common shares of the Investee Corporationfor $600,000. Purchaser Corporation acquires the investment inInvestee Corporation by buying previously issued shares of InvesteeCorporation from other investors. When Purchaser Corporationacquired 30% of Investee CorporationâÂÂs common shares for $600,000,Investee CorporationâÂÂs total shareholdersâ equity was $1.5 million.Purchaser CorporationâÂÂs cost exceeds the carrying value of the netassets acquired by $150,000 [ $600,000 - (0.30 x$1,500,000)].
Purchaser Corporation attributes the $150,000 excess purchaseprice as follows: $100,000 to remeasure buildings and equipment tofair value and $50,000 to goodwill. Which of the following is/aretrue?
a. | Purchaser Corporation does not reclassify this excess out of itsInvestment in Stock of Investee Corporation account to Buildingsand Equipment and to Goodwill. |
b. | Purchaser Corporation must amortize (or depreciate) any amountattributed to assets with limited lives. |
c. | Purchaser Corporation must depreciate the $100,000 attributed tobuildings and equipment over their remaining useful lives. |
d. | U.S. GAAP and IFRS do not permit the investor to amortize theexcess purchase price attributed to goodwill and other assets withindefinite lives. Instead, the investor must test the investmentaccount annually for possible impairment. |
e. | all of the above |
32. Pareto Corporation owns 40% ofSpring Corporation. During Year 3, Spring has net income of$60,000. What entry should Pareto record related to its investmentin Spring during Year 3?
a. | Investment in SpringCorp. 24,000 Equity in Earnings ofAffiliate 24,000 |
b. | DividendReceivable 24,000 DividendIncome 24,000 |
c. | InvestmentReceivable 24,000 InvestmentIncome 24,000 |
d. | Investment in SpringCorp. 24,000 InvestmentIncome 24,000 |
e. | Investment in SpringCorp. 24,000 Cash 24,000 |
35. Pense Co. purchased 40% of thestock of Stretch Co. in Year 1 for $100,000. Stretch had net incomein Year 1 of $50,000 and net income in Year 2 of $30,000. Stretchalso paid total dividends of $20,000 in Year 2. On January 1, Year3, Pense Co. sold its investment in Stretch Co. to GE CapitalCorporation (GE) for $130,000. What entry would Pense Co. make torecord the sale of Stretch Co.?
a. | Cash 130,000 Gain onSale 6,000 Investment inStretch 124,000 |
b. | Cash 130,000 Loss onSale 2,000 Investment inStretch 132,000 |
c. | Cash 130,000 Loss onSale 10,000 Investment inStretch 140,000 |
d. | Cash 130,000 Loss onSale 30,000 Investment inStretch 160,000 |
e. | Cash 130,000 Loss onSale 20,000 Investment inStretch 150,000 |
55. Intercompany sales
a. | do not need to be eliminated as long as the sales have beencompleted to an outside party. |
b. | must be eliminated from both the sales and cost of goods soldaccounts. |
c. | do not need to be eliminated if made at arm's length values. |
d. | must be eliminated only if not in the ordinary course of tradeor business. |
e. | do not need to be eliminated. |
54. To avoid double counting P'sinvestment in S, P must eliminate
a. | the investment in S and S's separate company shareholders'equity. |
b. | all debt on S's separate company financial statements. |
c. | any dividends paid against the cash account. |
d. | all intercompany transactions. |
e. | all of the above. |
58. U.S. GAAP view investments of over50 percent of the voting stock of another company (for the purposeof controlling the other company at the broad policy-making leveland at the day-to-day operational level) as
a. | minority, passive investments. |
b. | minority, active investments. |
c. | majority, passive investments. |
d. | majority, active investments. |
e. | marketable securities. |
33. If Wabasso Company pays $55,000 individends to its corporate investor Lament Corporation (Lament owns35% of The Wabasso Company), what entry should Lament Corporationrecord when it receives the dividends?
a. | Cash 55,000 DividendIncome 55,000 |
b. | Cash 55,000 InvestmentIncome 55,000 |
c. | Cash 55,000 Investment in WabassoCompany 55,000 |
d. | Cash 55,000 Additional Paid-inCapital 55,000 |
e. | Cash 55,000 Common Stock- WabassoCompany 55,000 |
25. Purchaser Corporation acquires 30%of the outstanding voting common shares of the Investee Corporationfor $600,000. Purchaser Corporation acquires the investment inInvestee Corporation by buying previously issued shares of InvesteeCorporation from other investors. When Purchaser Corporationacquired 30% of Investee CorporationâÂÂs common shares for $600,000,Investee CorporationâÂÂs total shareholdersâ equity was $1.5 million.Purchaser CorporationâÂÂs cost exceeds the carrying value of the netassets acquired by $150,000 [ $600,000 - (0.30 x$1,500,000)].
Purchaser Corporation attributes the $150,000 excess purchaseprice as follows: $100,000 to remeasure buildings and equipment tofair value and $50,000 to goodwill. Which of the following is/aretrue?
a. | Purchaser Corporation does not reclassify this excess out of itsInvestment in Stock of Investee Corporation account to Buildingsand Equipment and to Goodwill. |
b. | Purchaser Corporation must amortize (or depreciate) any amountattributed to assets with limited lives. |
c. | Purchaser Corporation must depreciate the $100,000 attributed tobuildings and equipment over their remaining useful lives. |
d. | U.S. GAAP and IFRS do not permit the investor to amortize theexcess purchase price attributed to goodwill and other assets withindefinite lives. Instead, the investor must test the investmentaccount annually for possible impairment. |
e. | all of the above |
20. Pagoli Corporation acquires 30% ofthe outstanding voting common shares of the Inform Corporation for$600,000. Pagoli Corporation acquires the investment in InformCorporation by buying previously issued shares of InformCorporation from other investors.
Between the time of the acquisition and the end of PagoliCorporationâÂÂs next accounting period, Inform Corporation reportsearnings of $80,000; and pays a dividend of $30,000 to holders ofits common stock.
Inform Corporation reports earnings of $100,000 and paysdividends of $40,000 during the subsequent accounting period.
Pagoli CorporationâÂÂs Investment in Stock of Inform Corporationaccount now has a balance of:
a. | $609,000 |
b. | $621,000 |
c. | $633,000 |
d. | $642,000 |
e. | $657,000 |
