Sample Quiz for Chapter 2

Sample Quiz for Chapter 2 - Indiana University of...

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Indiana University of Pennsylvania Department of Accounting ACCT 401/501: Advanced Accounting Dr. Rahman Sample Quiz for Chapter 2 1. When Eagle Company has less than 50% of the voting stock of Snow Corporation which of the following applies? a. Only the fair value method may be used. b. Only the equity method may be used. c. Either the fair value method or the equity method may be used. d. Neither the fair value method nor the equity method may be used. 2. Which one of the following statements is correct for an investor company? a. Once the balance in the Investment in Osprey Co. account reaches zero, it will not be reduced any further. b. Under the equity method, the balance in the Investment in Osprey Co. account can be negative if the investee corporation operates at a loss. c. Application of the equity method is discontinued when the investor’s share of losses reduces the carrying amount of the investment to zero. d. Under the equity method, any goodwill inherent or contained in the Investment in Osprey Co. account will be amortized to the income earned from the investee. 3. Griffon Incorporated holds a 30% ownership in Duck Corporation. Griffon should use the equity method under which of the following circumstances? a. Griffon has surrendered significant stockholder rights by agreement between Griffon and Duck. b. Griffon has been unable to secure a position on the Duck Corporation Board of Directors. c. Griffon’s ownership is temporary. d. The ownership of Duck Corporation is diverse. 4. Tanessha Corporation’s stockholder’s equity at December 31, 2017 included the following: 8% Preferred stock, $10 par value $ 2,000,000 Common stock, no par 20,000,000 Additional paid-in capital
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This note was uploaded on 09/21/2011 for the course ECON 101 taught by Professor Flah during the Spring '10 term at Punjab Engineering College.

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Sample Quiz for Chapter 2 - Indiana University of...

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