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The cost method of accounting for investments in

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102.The cost method of accounting for investments in stock should be used when theinvestment isa.influential and controlling.b.influential and noncontrolling.c.controlling.d.non-influential and noncontrolling.Ans: D, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FC: Reporting, AICPA PC: ProjectManagement, IMA: Investment DecisionsH-24
103.The ability of an investing company to affect the operating and financial activities ofanother company, even though the investor holds less than 50% of the stock, is known as
FOR INSTRUCTOR USE ONLY
Reporting and Analyzing Investments104.Under the equity method of accounting for investments in common stock, when adividend is received from the investee companyFSA
105.The receipt of dividends on an investment affects the Stock Investment account whenwhich of the following methods is used?
106.Bing Company owns 30% interest in the stock of Yeti Corporation. During the year, Yetipays $75,000 in dividends to Bing, and reports $400,000 in net income. Bing Company’sinvestment in Yeti will increase Bing net income bya.$120,000.b.$97,500.c.$75,000.d.$22,500.Ans: A, LO: 2, Bloom: AP, Difficulty: Medium, Min: 2, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FC: Reporting, AICPA PC: ProblemSolving, IMA: ReportingSolution: 30% × $400,000$120,000(Own. % × Net inc.)

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Term
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