Advanced Acct Notes

Advanced Acct Notes - CHAPTER 1 Gaw Company owns 15% of the...

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CHAPTER 1 Gaw Company owns 15% of the common stock of Trace Corporation and used the fairvalue method to account for this investment. (B. 9,000) Yaro Company owns 30% of the common stock of Dew Co. and uses the equity method toaccount for the investment. (B. 75,000) On January 1, 2011, Pacer Company paid $1,920,000 for 60,000 shares of Lennon Co.'svoting common stock which represents a 45% investment. (E. 2,071,500) A company should always use the equity method to account for an investment if: ( A. it has the ability to exercise significant influence over the operating policies of the investee.) On January 1, 2009, Dermot Company purchased 15% of the voting common stock of Horne Corp. ( C. It must restate the financial statements for 2010 and 2009 as if the equity method had been used for those two years.) During January 2010, Wells, Inc. acquired 30% of the outstanding common stock of Wilto Co. for $1,400,000. This investment gave Wells the ability to exercise significant influence over Wilton. ( A. 1,609,000) On January 1, 2011, Bangle Company purchased 30% of the voting common stock of Sleat Corp. for $1,000,000. ( A. $950,800.) On January 1, 2011, Jordan Inc. acquired 30% of Nico Corp. Jordan used the equity method to account for the investment ( E. Jordan should use the fair-value method for 2012 and future years but should not make aretrospective adjustment to the investment account.) Tower Inc. owns 30% of Yale Co. and applies the equity method. During the current year, Tower bought inventory costing $66,000 and then sold it to Yale for $120,000. ( B. 3,240) On January 4, 2011, Watts Co. purchased 40,000 shares (40%) of the common stock of Adams Corp., paying $800,000. There was no goodwill or other cost allocation associated with the investment. ( B. 742,000) On January 3, 2011, Austin Corp. purchased 25% of the voting common stock of Gainsville Co., paying $2,500,000. Austin decided to use the equity method to account for this investment… o What is the amount of goodwill associated with the investment? ( D. 300,000) o For 2011, what is the total amount of excess amortization for Austin's 25% investment in Gainsville? ( C. 30,000) Club Co. appropriately uses the equity method to account for its investment in Chip Corp. ( B. No accounting because the decline in fair value is temporary.) An upstream sale of inventory is a sale: ( E. made by the investee to the investor.) Atlarge Inc. owns 30% of the outstanding voting common stock of Ticker Co. and has the ability to significantly influence the investee's operations and decision making… o What amount of equity income would Atlarge have recognized in 2011 from its ownership interest in Ticker? ( C. 22,672) o What was the balance in the Investment in Ticker Co. account at the end of 2011? ( B. 413,872) On January 1, 2011, Deuce Inc. acquired 15% of Wiz Co.'s outstanding common stock for $62,400 and categorized the investment as an available-for-sale security…
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Advanced Acct Notes - CHAPTER 1 Gaw Company owns 15% of the...

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