ACC 302.1 (2011-1) practice Quiz 2

ACC 302.1 (2011-1) practice Quiz 2 - DueDate:March24,2011...

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Due Date: March 24, 2011 ACC 302.1 (2011-1) Practice Quiz 2 Student: ___________________________________________________________________________ 1. Listed below are ten terms followed by a list of phrases that describe or characterize five of the terms. Match each phrase with the correct term by placing the letter designating the best term in the space provided by the phrase. a. Impairment of securities available for sale Recognized only to the extent of carrying value under the equity method. ____ b. Losses of investee Reported in the income statement for trading securities. ____ c. Unrealized holding gains and losses Reduces investment account under the equity method if its fair value is higher than its book value. ____ d. Amortization of a patent that was obtained in a business acquisition Requires positive intent and ability. ____ e. Securities held to maturity Requires recognition in the income statement if judged to be other than temporary. ____ 2. FKG Inc. carries the following investments on its books at December 31, 2010, and December 31, 2011. All securities were purchased during 2010. Page  1  of  10
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Required: (1.) Prepare the necessary journal entries for FKG on December 31, 2010, and December 31, 2011. (You may journalize each stock separately or by classification.) (2.) What net effect would the valuation of these stock investments have on 2010 net income? On 2011 net income? 3. Dicker Furriers purchased one thousand shares of Loose Corporation stock on January 10, 2010, for $800 per share and classified the investment as securities available for sale. Loose's market value was $400 per share on December 31, 2010, and the decline in value was viewed as temporary. As of December 31, 2011, Dicker still owned the Loose stock whose market value has declined to $100 per share. The decline is due to a reason that's judged to be other than temporary. Dicker's December 31, 2011, balance sheet and the 2011 income statement would show the following: Show how you arrived at your answer in T accounts. A. Option A B. Option B C. Option C D. Option D
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Due Date: March 24, 2011 4. Which of the following is not true about the fair value option? A. The fair value option is irrevocable. B. The fair value option must be elected for all investments made by the company. C. Electing the fair value option for held-to-maturity investments simply reclassifies those investments as trading securities. D. All of the above are true. At the start of the current year, SBC Corp. purchased 30% of Sky Tech Inc. for $45 million. At the time of purchase, the carrying value of Sky Tech's net assets was $75 million. The fair value of Sky Tech's depreciable assets was $15 million in excess of their book value. For this year, Sky Tech reported a net income of $75 million and declared and paid $15 million in dividends. 5.
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This note was uploaded on 03/30/2011 for the course ACC 302.1 taught by Professor Loran during the Spring '11 term at Piedmont College.

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ACC 302.1 (2011-1) practice Quiz 2 - DueDate:March24,2011...

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