110. On January 3, 2011, Jenkins Corp. acquired 40% of the outstanding common stock of
Bolivar Co for $1,200,000. This acquisition gave Jenkins the ability to exercise significant
influence over the investee. The book value of the acquired shares was $950
114. On January 2, 2010, Hull Corp. paid $516,000 for 24% (48,000 shares) of the outstanding
common stock of Oliver Co. Hull used the equity method to account for the investment. At the
end of 2010, the balance in the investment account was $620,000. On J
Multiple Choice Questions
1. Ben & Jerry's product mission contains three interrelated parts. The primary focus of Ben &
Jerry's product mission is to make, distribute, and sell the finest quality all natural ice cream and
euphoric concoctions with
86. (p. 29) The _ for Lucent Technologies is "To use our unique capabilities to ensure
that our customers thrive, our business grows, and we enrich the personal communications
experience for people around the world."
A. benefit statement
B. business portf
58. (p. 28) Which of the following statements would most likely be heard at the functional level of
A. "We need to be aware of what our competitors are doing."
B. "How much money can we allot to the marketing department?"
C. "Make sure we
7. On January 1, 2011, Bangle Company purchased 30% of the voting common stock of Sleat
Corp. for $1,000,000. Any excess of cost over book value was assigned to goodwill. During
2011, Sleat paid dividends of $24,000 and reported a net loss of $140,000. Wh
4. 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.
B. it owns 30% of another company's stock.
C. it has a controlling inter
The Equity Method of Accounting for Investments
Multiple Choice Questions
1. Gaw Company owns 15% of the common stock of Trace Corporation and used the fair-value
method to account for this investment. Trace reported net income of $110,000 for
106. (p. 31) A small businesswoman was preparing her staff for the upcoming holiday season.
"We want to move as much inventory as possible. Not only can we highlight our holiday items,
why not mark down some of our other seasonal items while people are in
62. (p. 29) Today's visionary organization uses key elements to (1) _ and (2) set a
direction using (3) its strategies that enable it to develop and market its offerings successfully.
A. set financial goals
B. establish a foundation
C. establish detailed
25. How should a permanent loss in value of an investment using the equity method be treated?
A. The equity in investee income is reduced.
B. A loss is reported the same as a loss in value of other long-term assets.
C. The investor's stockholders' equity
21. 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.
12. For 2011, what is the total amount of excess amortization for Austin's 25% investment in
13. Club Co. appropriately uses the equity method to account for its investment in Chip C
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. On January 1,
2011, the balance in the Investment in Ticker Co. account was $402,000.
17. On Deuce's December 31, 2012 balance sheet, what balance was reported for the Investment
in Wiz Co. account?
18. What amount of equity income should Deuce have reported for 2012?
10. 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. Watts has significant influence over Adams. During 2011, Ad
On January 1, 2010, Dawson, Incorporated, paid $100,000 for a 30% interest in Sacco
Corporation. This investee had assets with a book value of $550,000 and liabilities of $300,000.
A patent held by Sacco having a book value of $10,000 was actually worth $
104. (p. 31) A new company projects that its sales will be greater than its expenses within the first
year of operation. This is an example of which type of goal?
B. Sales revenue
C. Market share
D. Unit sales
Classic economic theory
102. (p. 31) The terms "goal" and "objective" are often used interchangeably; however, in both
cases, which of the following statements would be most accurate?
A. All lower-level goals must contribute to achieving goals at the next, higher level.
100. (p. 31) Statements of an accomplishment of a task to be achieved, often by a specific time are
referred to as
Key term definitiongoal, objective
Learning Objective: 02-
76. (p. 29) The term that links the employees, shareholders, board of directors, suppliers,
distributors, creditors, unions, government, local communities, and customers of an
C. limited partnerships.
78. (p. 29) The Ben & Jerry's website states "Central to the mission of Ben & Jerry's is the belief
that all three parts [product mission, economic mission, social mission] must thrive equally in a
manner that commands deep respect for individuals in and
80. (p. 29) The term used to identify the people who are affected by what a company does and
how well it performs are an organization's _.
A. corporate citizens
D. potential customers base
E. integrated resource base
84. (p. 29) By understanding its business, an organization can take steps to define its _,
a statement of the organization's functions in society, often identifying its customers, markets,
products, and technologies, often used interchangeably with vision
82. (p. 29) Which of the following statements regarding stakeholders is most accurate?
A. Employees are typically not classified as a stakeholder group.
B. There are only three types of external stakeholderscustomers, suppliers, and distributors.
C. All s
88. (p. 29) Although companies have long used mission statements to guide them in business, in
recent years many companies have altered their mission statements to include
A. a formal commitment to their employees.
B. an expanded definition of stakeholder
90. (p. 30) Organizational culture refers to
A. the personal moral and ethical codes of a firm's management.
B. written mission statements expressing a firm's goals and objectives.
C. the fundamental, passionate, and enduring principles that guide its con
92. (p. 30) Which of the following statements regarding organizational culture is most accurate?
A. Organizational culture exists only at the corporate level of an organization.
B. When corporations merge organizational cultures can collide.
94. (p. 30) The clear, broad, underlying industry category or market sector of an organization's
offering is referred to as _.
Key term definitionbusiness
Learning Objective: 02-02 Descr
98. (p. 30) Procter and Gamble Co. manufactures consumer products such as Crest toothpaste and
the Swiffer mop. But P & G does not see itself as a toothpaste or a mop company. Instead it sees
itself as an innovative company with the goal of solving consum