Multiple Choice Questions
Gaw Company owns 15% of the common stock of Teal Corporation and used the fair-
value method to account for this investment.
Teal reported net income of $110,000 for
2002 and paid dividends of $60,000 on October 1, 2002.
How much income should Gaw
recognize on this investment in 2002?
Yult Company owns 25% of the common stock of Dent Co. and uses the equity method
to account for the investment.
During 2002, Dent reported income of $220,000 and paid
dividends of $80,000.
There is no amortization associated with the investment.
2002, how much income should Yult recognize related to this investment?
On January 1, 2003, Pacer Company paid $1,920,000 for 60,000 shares of Lennon Co.'s
voting common stock which represents a 45% investment.
No allocation to goodwill or
other specific account was made.
Significant influence over Lennon was achieved by this
Lennon distributed a dividend of $2.50 per share during 2003 and reported
net income of $670,000.
What was the balance in the
Investment in Lennon Co.
found in the financial records of Pacer as of December 31, 2003?