Question 1

At the end of each accounting period,trading debt securities must be adjusted and reported at fair value.

Accepted Answer

This statement is true. Trading debt securities must be adjusted and reported at fair value at the end of each accounting period. This is in accordance with accounting standards (such as U.S. GAAP or IFRS) which require financial instruments to be reported at fair value for transparency and accuracy in financial reporting.

Question 2

Which of the following is TRUE of consolidated statements?

Accepted Answer

Consolidated statements combine the financial statements of the parent company with those of its subsidiaries or affiliates over which it has controlling interest, including balance sheets, income statements, and cash flow statements.

Question 3

Emerald Investments,Inc.purchased 40% of the common stock of Diamond Corporation on March 1,2018.Diamond Corporation reports a net income of $675,000 for the year 2019.Which of the following is TRUE of the balance sheet on December 31,2019?

Accepted Answer

As Emerald Investments, Inc. owns 40% of Diamond Corporation, they are considered a significant influence on Diamond Corporation's financial statements. Therefore, Emerald Investments, Inc. will record their share of Diamond Corporation's net income in their own financial statements, which will increase their equity (investment) in Diamond Corporation. Thus, total equity will increase. Total assets and liabilities may or may not be affected by this transaction. Cash may or may not increase as it is not mentioned if Diamond Corporation pays dividends or if Emerald Investments, Inc. receives any cash from the investment.

Question 4

A company that is controlled by another corporation is called a subsidiary company.

Accepted Answer

This statement is true. A subsidiary company is one that is owned and controlled by another company or the parent company. The parent company owns a controlling interest in the subsidiary, usually by owning more than 50% of its shares.

Question 5

The Gain on Disposal of Equity Investment is a(n)________.

Accepted Answer

The answer of The Gain on Disposal of Equity Investment...

Question 6

Which of the following accounting methods is used to account for controlling interest investments?

Accepted Answer

The consolidation method is used to account for controlling interest investments. This method combines the financial statements of the parent company and its subsidiaries into a single set of consolidated financial statements, eliminating any intercompany transactions and controlling interest that exist in the individual company statements. The cost method is used for investments where the investor has significant influence but not control, while the acquisition method is used when a company acquires another company and has control over it. The discounted cash flow method is used for valuing future cash flows of investments.

Question 7

Provide the following information for controlling interest equity investments:
1.Which accounting method is used?
2.What is the balance sheet effect when using this accounting method?
3.What is the income statement effect when using this accounting method?

Accepted Answer

The answer of Provide the following information for controlling interest...

Question 8

A subsidiary company is a company that ________.

Accepted Answer

A subsidiary company is a company that is controlled by another corporation. This means that the parent company owns more than 50% of the subsidiary, giving it controlling interest or influence in its operations and decisions.

Question 9

When a loss is recorded on the sale of a significant influence equity investment,________.

Accepted Answer

When a loss is recorded on the sale of a significant influence equity investment, it means that the investment was sold for less than its original cost. This results in a decrease in the value of the investment and a decrease in the owner's equity. As a result, the total assets will also decrease. Thus, choice letter C is the correct answer.

Question 10

Consolidation accounting is the way to combine the financial statements of two or more companies that have the same owners.

Accepted Answer

Consolidation accounting involves combining the financial statements of multiple companies that have the same owners, often used in situations of mergers, acquisitions, or holding companies.

Question 11

On January 1,2018,West Coast Boats paid $ 1,850,000 for its 30% investment in East Coast Autos.After the purchase,West Coast Boats has significant influence over East Coast Autos.East Coast Autos earned net income of $30,000,000 and paid cash dividends of $15,000,000 to all outstanding stockholders during 2018.Assume all outstanding stock is voting stock.
Requirement:
1.Journalize all required 2018 transactions related to West Coast Boats' investment in East Coast Autos.Omit explanations.
2.What is the December 31,2018 balance of the investment account? Label your work.

Accepted Answer

The answer of On January 1,2018,West Coast Boats paid $...

Question 12

Under the equity method,the investor ________.

Accepted Answer

Under the equity method, the investor must record its share of the investee's net income. This is because the equity method is used when the investor has significant influence over the investee, which means the investor has the ability to participate in the investee's decisions and operations. As a result, the investor is considered to have a share in the investee's earnings and losses. The other choices are incorrect as they do not accurately describe the requirements of the equity method.

Question 13

Marley Investments,Inc.purchased 45% of the common stock of Beige Corporation on January 1,2019.Beige Corporation reports a net income of $720,000 for the 2019 year.Which of the following is the correct journal entry?

Accepted Answer

Marley Investments, Inc. owns 45% of Beige Corporation, so it recognizes 45% of Beige's net income as its income from the investment. Beige's net income is $720,000, so Marley's share is 45% of $720,000 = $324,000. This income increases the "Equity Investments-Beige Corporation" account and is recorded as "Revenue from Investments."

Question 14

A parent company is a company that is controlled by another corporation.

Accepted Answer

A subsidiary company is a company that is controlled by another corporation.

Question 15

An investor owns a controlling interest when the investor has legal control over the investee company and generally owns more than 50% of the investee's voting stock.

Accepted Answer

An investor owning a controlling interest generally means that they have legal control and over 50% of the voting stock of the investee company.

Question 16

Wheat Corporation pays $532,000 for 100,000 shares to acquire 45% common stock of Grain Investments,Inc.on January 5,2018.Wheat Corporation sells 20,000 shares for $40,000 on January 6,2018.Which of the following is the correct journal entry for the transaction on January 6,2018? (Round any intermediate calculations to two decimal places,and your final answer to the nearest dollar.)

Accepted Answer

The cost per share is calculated as $532,000 / 100,000 shares = $5.32 per share. Selling 20,000 shares at $5.32 per share gives a book value of $106,400 (20,000 shares * $5.32). The cash received is $40,000, resulting in a loss of $66,400 ($106,400 book value - $40,000 cash received). The correct journal entry debits cash for the amount received, debits loss on disposal for the loss incurred, and credits equity investments for the book value of the shares sold.

Question 17

Consolidated statements combine the balance sheets,income statements,and statement of cash flows of
the parent company with those of its controlling interest affiliates.

Accepted Answer

Consolidated statements are used to combine the financial statements of a parent company with its subsidiaries or controlling interest affiliates in order to present a comprehensive view of the financial health of the entire group.

Question 18

A parent company is a company that ________.

Accepted Answer

A parent company is a company that owns a controlling interest in another company, meaning they own more than 50% of the voting shares and have the power to control the subsidiary's operations and decisions. The subsidiary is therefore considered a subsidiary of the parent company.

Question 19

List and briefly describe the method used to account for investments in equity securities with more than 50% ownership.

Accepted Answer

The answer of List and briefly describe the method used...

Question 20

Complete the following statement:
When a company invests in equity securities with 20% to 50% ownership in the investee's ________ stock,the investor can ________ ________ the investee's decisions.These types of investments must be accounted for using the ________ method.

Accepted Answer

The answer of Complete the following statement:
When a company invests...

Quiz 15: Investments

At the end of each accounting period,trading debt securities must be adjusted and reported at fair value.

Which of the following is TRUE of consolidated statements?

Emerald Investments,Inc.purchased 40% of the common stock of Diamond Corporation on March 1,2018.Diamond Corporation reports a net income of $675,000 for the year 2019.Which of the following is TRUE of the balance sheet on December 31,2019?

A company that is controlled by another corporation is called a subsidiary company.

The Gain on Disposal of Equity Investment is a(n) ________.

Which of the following accounting methods is used to account for controlling interest investments?

Provide the following information for controlling interest equity investments: 1.Which accounting method is used? 2.What is the balance sheet effect when using this accounting method? 3.What is the income statement effect when using this accounting method?

A subsidiary company is a company that ________.

When a loss is recorded on the sale of a significant influence equity investment,________.

Consolidation accounting is the way to combine the financial statements of two or more companies that have the same owners.

Under the equity method,the investor ________.

Marley Investments,Inc.purchased 45% of the common stock of Beige Corporation on January 1,2019.Beige Corporation reports a net income of $720,000 for the 2019 year.Which of the following is the correct journal entry?

A parent company is a company that is controlled by another corporation.

An investor owns a controlling interest when the investor has legal control over the investee company and generally owns more than 50% of the investee's voting stock.

Consolidated statements combine the balance sheets,income statements,and statement of cash flows of the parent company with those of its controlling interest affiliates.

A parent company is a company that ________.

List and briefly describe the method used to account for investments in equity securities with more than 50% ownership.

Complete the following statement: When a company invests in equity securities with 20% to 50% ownership in the investee's stock,the investor can the investee's decisions.These types of investments must be accounted for using the method.

Quiz 15: Investments

At the end of each accounting period,trading debt securities must be adjusted and reported at fair value.

Which of the following is TRUE of consolidated statements?

Emerald Investments,Inc.purchased 40% of the common stock of Diamond Corporation on March 1,2018.Diamond Corporation reports a net income of $675,000 for the year 2019.Which of the following is TRUE of the balance sheet on December 31,2019?

A company that is controlled by another corporation is called a subsidiary company.

The Gain on Disposal of Equity Investment is a(n) ________.

Which of the following accounting methods is used to account for controlling interest investments?

Provide the following information for controlling interest equity investments: 1.Which accounting method is used? 2.What is the balance sheet effect when using this accounting method? 3.What is the income statement effect when using this accounting method?

A subsidiary company is a company that ________.

When a loss is recorded on the sale of a significant influence equity investment,________.

Consolidation accounting is the way to combine the financial statements of two or more companies that have the same owners.

Under the equity method,the investor ________.

Marley Investments,Inc.purchased 45% of the common stock of Beige Corporation on January 1,2019.Beige Corporation reports a net income of $720,000 for the 2019 year.Which of the following is the correct journal entry?

A parent company is a company that is controlled by another corporation.

An investor owns a controlling interest when the investor has legal control over the investee company and generally owns more than 50% of the investee's voting stock.

Consolidated statements combine the balance sheets,income statements,and statement of cash flows of the parent company with those of its controlling interest affiliates.

A parent company is a company that ________.

List and briefly describe the method used to account for investments in equity securities with more than 50% ownership.

Complete the following statement: When a company invests in equity securities with 20% to 50% ownership in the investee's ________ stock,the investor can ________ ________ the investee's decisions.These types of investments must be accounted for using the ________ method.

Complete the following statement: When a company invests in equity securities with 20% to 50% ownership in the investee's stock,the investor can the investee's decisions.These types of investments must be accounted for using the method.