Ftx company owns 10 interest in the stock of zip

112. FTX Company owns 10% interest in the stock of Zip Corporation. During the year, Zip
pays $5,000 in dividends to FTX, and reports a net loss of $100,000. FTX Company’s
investment in Zip will affect FTX net income by a
a. $5,000 increase.
b. $10,000 increase.
c. $10,000 decrease.
d. $5,000 decrease.
Ans: A, LO: 2, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FC: Reporting, AICPA PC: Problem
Solving, IMA: Reporting
H-26
FOR INSTRUCTOR USE ONLY

Reporting and Analyzing Investments
113. On January 1, 2022, Valentine Corporation purchased 25% of the common stock
outstanding of Betz Corporation for $200,000. During 2022, Betz Corporation reported
net income of $80,000 and paid cash dividends of $48,000. The balance of the Stock
Investments—Betz account on the books of Valentine Corporation at December 31, 2022,
is
114. On January 1, 2022, the Express Corporation purchased 30% of the common stock
outstanding of the Bangor Corporation for $300,000. During 2022, the Bangor
Corporation reported net income of $120,000 and paid cash dividends of $30,000. The
balance of the Stock Investments—Bangor account on the books of Express Corporation
at December 31, 2022, is
115. Under the equity method, the Stock Investments account is increased when the