Question 1

Use this information to answer the following question.These facts concern the long-term stock investments of Alpha Corporation:  The entry to record the receipt of the cash dividend from Burns Corporation is:

Accepted Answer

The entry to record the receipt of the cash dividend should be a debit to Cash and a credit to Dividend Revenue. Only option B shows this correct arrangement of accounts.

Question 2

A credit balance in the account Allowance to Adjust Long-Term Investments to Market is disclosed in the financial statements as a

Accepted Answer

A credit balance in the account Allowance to Adjust Long-Term Investments to Market is a contra account to Long-Term Investments. It is disclosed on the balance sheet as a reduction in the carrying value of Long-Term Investments. It represents an adjustment to the historical cost of the investments to reflect their fair value at the end of the reporting period.

Question 3

Rapp Corporation has invested in the stock of two other corporations,Hart Corporation and Hilker Corporation.Rapp does not own a controlling interest or exercise significant influence over either corporation.Rapp's accountant is preparing financial statements and has compiled the following information: $\begin{array}{cccc}
\text { Stock name } & \text { No. of shares } & \text { Cost } & \text { Market } \
\text { Hart } & 1,000 & \$ 23,000 & \$ 24,000 \
\text { Hilker } & 500 & \$ 27,500 & \$ 25,500
\end{array}$ 
What should be the balance in the Allowance to Adjust Long-Term Investments to Market account,based on the above information?

Accepted Answer

The answer of Rapp Corporation has invested in the stock...

Question 4

Under the cost-adjusted-to-market method of accounting for an investment,

Accepted Answer

The answer of Under the cost-adjusted-to-market method of accounting for...

Question 5

Orlov Corporation purchased 22,000 shares of Matsey Corporation common stock for $40 per share on January 1,2009.Matsey reported net income of $120,000 for 2009 and paid dividends of $45,000 during 2009.As of December 31,2009,the market value of Matsey Corporation common stock was $39 per share.Assuming the shares owned by Orlov represent 10 percent of the total outstanding stock of Matsey,the year end adjustment entry in Orlov Corporation's books is:

Accepted Answer

Since Orlov Corporation owns less than 20% of Matsey Corporation, it should use the fair value method. The market value decreased from $40 to $39 per share, resulting in an unrealized loss of $22,000 (22,000 shares x $1 loss per share).

Question 6

Hauser Corporation holds 1,900 shares of Marlow Corporation common stock as its sole long-term investment.Hauser does not have significant influence or control over Marlow.The stock was purchased during 2009 at a price of $60 per share.On December 31,2009,the market price of Marlow's stock was $54 per share.On December 31,2010,the market price of Marlow's stock was $68 per share.What should be reported as the carrying value of the investment on Hauser's December 31,2009,and December 31,2010,balance sheets,respectively?

Accepted Answer

The answer of Hauser Corporation holds 1,900 shares of Marlow...

Question 7

Use this information to answer the following question.These facts concern the long-term stock investments of Alpha Corporation:  The entry to set up the Allowance to Adjust Long-Term Investments to Market in 2009 is:

Accepted Answer

The answer of Use this information to answer the following...

Question 8

Mucura Enterprises has a credit balance of $40,000 in its Allowance to Adjust Long-Term Investments to Market account before adjustment.Its investment portfolio has a total cost of $250,000 and a market value of $225,000.The year-end adjustment entry that would be recorded in the books of Mucura Enterprises is:

Accepted Answer

The answer of Mucura Enterprises has a credit balance of...

Question 9

Petrus Corporation owns a 40 percent interest in the stock of Sunseri Corporation.During 2010,Sunseri pay $25,000 in dividends to Petrus and reports $107,000 in net income.Petrus Corporation's investment in Sunseri will increase Petrus's income before income taxes by

Accepted Answer

The answer of Petrus Corporation owns a 40 percent interest...

Question 10

Use this information to answer the following question.These facts concern the long-term stock investments of Alpha Corporation:  
The entry to adjust the Allowance to Adjust Long-Term Investments to Market in 2010 is:

Accepted Answer

The answer of Use this information to answer the following...

Question 11

Milner Corporation owns 25 percent of the voting stock of Vaglia Corporation and accounts for the investment using the equity method.Vaglia reports a net loss of $10,000.Milner Corporation's entry to record its share of loss is:

Accepted Answer

Milner Corporation uses the equity method to account for its investment in Vaglia Corporation. Under the equity method, Milner Corporation records its share of Vaglia Corporation's net income or loss as an adjustment to its investment account. In this case, Vaglia Corporation reported a net loss of $10,000, so Milner Corporation's share of the loss is $2,500 (25% x $10,000). The entry to record Milner Corporation's share of the loss is:Loss on Investments 2,500Investment in Vaglia Corporation 2,500

Question 12

Use this information to answer the following question.These facts concern the long-term stock investments of Alpha Corporation:  The entry to record the sale of 1,000 shares of Carey Corporation common stock is:

Accepted Answer

The answer of Use this information to answer the following...

Question 13

B & L Company has a credit balance of $44,000 in its Allowance to Adjust Long-Term Investments to Market account at the end of 20xx,before adjustment.Its investment portfolio has a total cost of $300,000 and a market value of $264,000 at December 31,20xx,a balance sheet date.The year-end adjustment entry that would be recorded in the books of B&L Company is:

Accepted Answer

The adjustment entry for the Allowance to Adjust Long-Term Investments to Market account would be to debit the account by $44,000 (to reduce the credit balance to zero) and to credit the Investment in Long-Term Securities account by $36,000 (the difference between the cost of $300,000 and the market value of $264,000). The correct entry is shown in choice letter B.

Question 14

Use this information to answer the following question.These facts concern the long-term stock investments of Alpha Corporation:  The entry to record the purchase of the Carey Corporation common stock is:

Accepted Answer

The answer of Use this information to answer the following...

Question 15

Flubber Corporation owns 40 percent of the voting stock of Rhim Corporation and accounts for the investment using the equity method; Rhim Corporation reports a net loss of $30,000.Flubber Corporation's entry to record the share of loss is:

Accepted Answer

Flubber Corporation owns 40% of Rhim Corporation, so it recognizes 40% of the $30,000 loss, which is $12,000. The entry debits "Loss, Rhim Corporation Investment" and credits "Investment in Rhim Corporation" for $12,000.

Question 16

Orlov Corporation purchased 8,000 shares of Matsey Corporation common stock for $40 per share on January 1,2009.Matsey reported net income of $120,000 for 2009 and paid dividends of $42,000 during 2009.As of December 31,2009,the market value of Matsey Corporation common stock was $40 per share.Assuming the shares owned by Orlov represent 10 percent of the total outstanding stock of Matsey,the entry to record the receipt of dividend income in Orlov Corporation's books is:

Accepted Answer

Orlov Corporation owns 10% of Matsey Corporation, so it receives 10% of the dividends paid. Matsey paid $42,000 in dividends, so Orlov receives $4,200 (10% of $42,000).

Question 17

Morse Company often invests in the stock of other companies for long-term purposes.None of the stocks currently held by Morse qualify for use of the equity method.The following amounts relate to Morse's long-term portfolio of marketable equity securities. $$\begin{array} { c c r } 
& \text { Dec. } 31,2009 & \text { Dec. 31, 2010 } \
\text { Total cost } & \$ 280,000 & \$ 330,000 \
\text { Total market } & 230,000 & 292,000
\end{array}$$ 
Based on the above information,the adjusting entry on December 31,2010 is:

Accepted Answer

The adjusting entry will involve adjusting the market values of the securities to their fair market values as of December 31, 2010. Therefore, the entry would be to debit Unrealized Gain or Loss on Available-for-Sale Securities for $29,000 ($260,000 - $231,000) and credit Available-for-Sale Securities for the same amount. The other options do not reflect this adjustment.

Question 18

All of the following are ways one corporation could affect the operating and financial policies of another corporation except

Accepted Answer

Analysis of data regarding profitability may provide information but it does not directly affect the operating and financial policies of another corporation. Material transactions, representation on the board of directors, and exchange of managerial personnel are all ways that one corporation could potentially influence the policies of another corporation.

Question 19

The ability of an investing company to affect the operating and financial policies of another company,even though the investor holds less than 50 percent of the voting stock,is known as

Accepted Answer

Significant influence refers to the ability of an investing company to have an impact on the operating and financial policies of another company, even though the investor does not hold a majority stake or control. This influence can be obtained through holding significant voting rights or serving on the board of directors. Control, on the other hand, typically requires a majority stake or the ability to direct the operations of a company. Minority interest refers to ownership of less than 50% of a company's shares, and noninfluential control is not a recognized term in finance or investing.

Question 20

The cost-adjusted-to-market method of accounting for investments is used when the investment is

Accepted Answer

The answer of The cost-adjusted-to-market method of accounting for investments...

Quiz 12: Investments

Use this information to answer the following question.These facts concern the long-term stock investments of Alpha Corporation: The entry to record the receipt of the cash dividend from Burns Corporation is:

A credit balance in the account Allowance to Adjust Long-Term Investments to Market is disclosed in the financial statements as a

Under the cost-adjusted-to-market method of accounting for an investment,

Use this information to answer the following question.These facts concern the long-term stock investments of Alpha Corporation: The entry to set up the Allowance to Adjust Long-Term Investments to Market in 2009 is:

Petrus Corporation owns a 40 percent interest in the stock of Sunseri Corporation.During 2010,Sunseri pay $25,000 in dividends to Petrus and reports $107,000 in net income.Petrus Corporation's investment in Sunseri will increase Petrus's income before income taxes by

Use this information to answer the following question.These facts concern the long-term stock investments of Alpha Corporation: The entry to adjust the Allowance to Adjust Long-Term Investments to Market in 2010 is:

Milner Corporation owns 25 percent of the voting stock of Vaglia Corporation and accounts for the investment using the equity method.Vaglia reports a net loss of $10,000.Milner Corporation's entry to record its share of loss is:

Use this information to answer the following question.These facts concern the long-term stock investments of Alpha Corporation: The entry to record the sale of 1,000 shares of Carey Corporation common stock is:

Use this information to answer the following question.These facts concern the long-term stock investments of Alpha Corporation: The entry to record the purchase of the Carey Corporation common stock is:

Flubber Corporation owns 40 percent of the voting stock of Rhim Corporation and accounts for the investment using the equity method; Rhim Corporation reports a net loss of $30,000.Flubber Corporation's entry to record the share of loss is:

All of the following are ways one corporation could affect the operating and financial policies of another corporation except

The ability of an investing company to affect the operating and financial policies of another company,even though the investor holds less than 50 percent of the voting stock,is known as

The cost-adjusted-to-market method of accounting for investments is used when the investment is