This preview shows pages 1–2. Sign up to view the full content.
This preview has intentionally blurred sections. Sign up to view the full version.View Full Document
Unformatted text preview: ACTG 3933 Quiz #1 September 23, 2010 v1 Solution 1. The accounting for investments in another entity's equity instruments depends mainly on a. The level of influence the investor is able to exert b. The level of influence the investor actually exerts c. The quality of earnings of the investee d. Whether the investee pays dividends 2. When a public company holds between 20% and 50% of the outstanding common shares of an investee, which of the following applies? a. The investor should always use the equity method to account for its investment. b. The investor should use the equity method to account for its investment unless circumstances indicate that it is unable to exercise "significant influence" over the investee. c. The investor must use the cost method unless it can clearly demonstrate the ability to exercise "significant influence" over the investee. d. The investor should always use the cost method to account for its investment. 3.Bitter Corporation accounts for its investment in the common shares of Young Company under the equity method. Bitter Corporation should ordinarily record a cash dividend received from Young 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. 4.Under the equity method of accounting for investments, an investor recognizes its share of the earnings in the period in which the a. investor sells the investment. b. investee declares a dividend. c. investee pays a dividend. d. earnings are reported by the investee in its financial statements. 5.If the parent company owns 90% of the subsidiary companys outstanding shares, the company should generally account for the subsidiary's income under the a. Cost/amortized cost model b. Fair value to net income model c. The equity method d. The consolidation method 6.The premium or discount on bonds accounted for under the cost/amortized cost model is a. Amortized over the expected holding period b. Amortized over the life of the bond c. Not amortized d. Is treated as a transaction cost 7.On its December 31, 2011, balance sheet, Merck Co. reported its temporary investment in equity securities, under the fair value through net income model at $330,000. At December 31, 2012, the fair value of the securities was $350,000. What should Merck report on its 2012 income statement model at $330,000....
View Full Document
This note was uploaded on 12/16/2011 for the course ACTG 3P33 taught by Professor N-a during the Fall '08 term at Brock University, Canada.
- Fall '08