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ACCOUNTING QUIZ - Quiz Multiple Choice(100 POINTS 1 Koehn...

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Quiz Multiple Choice (100 POINTS): 1.___. Koehn Corporation accounts for its investment in the common stock of Sells Company under the equity method. Koehn Corporation should ordinarily record a cash dividend received from Sells as: a. a reduction of the carrying value of the investment. b. additional paid-in capital. c. an addition to the carrying value of the investment. d. dividend income. 2.___Under the equity method of accounting for investments, an investor recognizes its share of the earnings in the period in which the: 3.___ Judd, Inc., owns 35% of Cosby Corporation. During the calendar year 2010, Cosby had net earnings of $300,000 and paid dividends of $30,000. Judd mistakenly recorded these transactions using the fair value method rather than the equity method of accounting. What effect would this have on the investment account, net income, and retained earnings, respectively? 4.___ Santo Corporation declares and distributes a cash dividend that is a result of current earnings. How will the receipt of those dividends affect the investment account of the investor under each of the following accounting methods? Fair Value Method Equity Method 1
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