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Gathered the following information about gainsvilles

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gathered the following information about Gainsville's assets and liabilities: For all other assets and liabilities, book value and fair value were equal. Any excess of cost over fair value was attributed to goodwill, which has not been impaired. 5. What is the amount of goodwill associated with the investment? A. $500,000 B. $200,000 C. $0 D. $300,000 E. $400,000 6. For 2008, what is the total amount of excess amortization for Austin's 25% investment in Gainsville? A. $27,500 B. $20,000 C. $30,000 D. $120,000 E. $70,000
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7. Club Co. appropriately uses the equity method to account for its investment in Chip Corp. As of the end of 2008, Chip's common stock had suffered a significant decline in fair value, which is expected to be recovered over the next several months. How should Club account for the decline in value? A. Club should switch to the fair-value method B. No accounting because the decline in fair value is temporary C. Club should decrease the balance in the investment account to the current value and recognize a loss on the income statement D. Club should not record its share of Chip's 2008 earnings until the decline in the fair value of the stock has been recovered E. Club should decrease the balance in the investment account to the current value and recognize an unrealized loss on the balance sheet 8. In a situation where the investor exercises significant influence over the investee, which of the following entries is not actually posted to the books of the investor? 1) Debit to the Investment account and a Credit to the Equity in Investee Income account. 2) Debit to Cash (for dividends received from the investee) and a Credit to Dividend Revenue. 3) Debit to Cash (for dividends received from the investee) and a Credit to the Investment account. A. Entries 1 and 2 B. Entries 2 and 3 C. Entry 1 only D. Entry 2 only E. Entry 3 only 9. All of the following statements regarding the investment account using the equity method are true except A. The investment is recorded at cost B. Dividends received are reported as revenue C. Net income of investee increases the investment account D. Dividends received reduce the investment account E. Amortization of fair value over cost reduces the investment account 10. A company has been using the equity method to account for its investment. The company sells shares and does not continue to have significant control. Which of the following statements is true? A. A cumulative effect change in accounting principle must occur B. A prospective change in accounting principle must occur C. A retrospective change in accounting principle must occur D. The investor will not receive future dividends from the investee E. Future dividends will continue to reduce the investment account
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11. An investee company incurs an extraordinary loss during the period. The investor appropriately applies the equity method. Which of the following statements is true? A.
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gathered the following information about Gainsvilles assets...

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