Moss corp owns 20 of dubro corps preferred stock and

13. Moss Corp. owns 20% of Dubro Corp.’s preferred stock and 80% of its common stock. Dubro’s stock
outstanding at December 31, year 1, is as follows:
10% cumulative preferred stock 100,000 Common stock 700,000 Dubro reported net income of 60,000
for the year ended December 31, year 1. What amount should Moss record as equity in earnings of
Dubro for the year ended December 31, year 1?
a. 42,000
b. 48,000
c. 48,400
d. 50,000
14. Wood Co. owns 2,000 shares of Arlo, Inc.’s 20,000 shares of 100 par, 6% cumulative, nonparticipating
preferred stock and 1,000 shares (2%) of Arlo’s common stock. During year 2, Arlo declared and paid
dividends of 240,000 on preferred stock. No dividends had been declared or paid during year 1. In
addition, Wood received a 5% common stock dividend from Arlo when the quoted market price of Arlo’s
common stock was 10 per share. What amount should Wood report as dividend income in its year 2
income statement?
15. Stone does not use the fair value option to account for available-for-sale securities. Information
regarding Stone Co.’s portfolio of available -for-sale securities is as follows:
Aggregate cost as of 12/31/Y2 170,000
Unrealized gains as of 12/31/Y2 4,000
Unrealized losses as of 12/31/Y2 26,000
Net realized gains during year 2 30,000
At December 31, year 1, Stone reported an unrealized loss of 1,500 in other comprehensive income to
reduce these securities to fair value. Under the accumulated other comprehensive income in
stockholders’ equity section of its December 31, year 2 balance sheet, what amount should Stone
report?
0

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16. Carsen Company purchased 200,000 of 10% bonds of Garrison Co. on January 1, 2019, paying 211,950.
The bonds mature January 1, 2026; interest is payable each July 1 and January 1. The discount of 11,950
provides an effective yield of 9%. Carsen’s objective is to hold the bonds to collect the contractual cash
flows. Carsen Company uses the effective interest method.
1. On July 1, 2019, Carsen Company should decrease its Held-for-collection Debt Investments
account for the Garrison Co. bonds by: