Question 1

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's outstanding stock, so Orlov is entitled to 10% of Matsey's dividends. Matsey paid dividends of $42,000 during 2009, so Orlov's share of the dividends is $4,200 (10% x $42,000).

Question 2

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 3

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

Accepted Answer

Analyzing data regarding profitability may provide information, but it does not directly affect the operating and financial policies of another corporation. The other options all involve some level of direct influence or interaction between the two corporations.

Question 4

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 5

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 6

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 7

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

Question 8

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 investor to exert a certain level of control or influence over another company, even if they own less than 50% of the voting stock. This can be achieved through the ownership of a significant portion of the company's non-voting shares, a board seat, or other means of influence. Control would require an investor to own more than 50% of the voting stock, while minority interest refers to a stake in a company that is not significant enough to exert influence. Noninfluential control is not a commonly used term in accounting or finance.

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 record the purchase of the Carey Corporation common stock is:

Accepted Answer

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

Question 11

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 for $12,000 and credits Investment in Rhim Corporation for $12,000.

Question 12

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 of the stock decreased from $40 to $39, resulting in an unrealized loss of $1 per share. For 22,000 shares, this is a $22,000 unrealized loss, which is recorded as an adjustment to market value.

Question 13

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. $$\begin{array} { l c r } 
& \text { Dec. } 31,2009 & \text { Dec. 31, 2010 } \
\text { Tatal cost } & \$ 280,000 & \$ 330,000 \
\text { Tatal market } & 230,000 & 292,000
\end{array}$$ Based on the above information,the adjusting entry on December 31,2010 is:

Accepted Answer

The answer of Morse Company often invests in the stock...

Question 14

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...

Question 15

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 16

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, Vagila Corporation Investment 2,500Investment in Vagila Corporation 2,500

Question 17

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 market value of the investments is $264,000, which is $36,000 less than the cost of $300,000. The current credit balance in the allowance account is $44,000, which means it needs to be reduced by $8,000 to reflect the correct unrealized loss. Therefore, the entry is to debit the allowance account and credit the unrealized loss account.

Question 18

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 represents a contra account to Long-Term Investments. This account is used to adjust the carrying value of long-term investments to their fair market value. Therefore, it is presented as a deduction from Long-Term Investments on the balance sheet.

Question 19

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: $\begin{array}{crrr}
\text { Stock name } & \text { No. of shares } & \text { Cost } & \text { Market }\
\text { Hart } & 1,000 & \$ 23,000 & \$ 24,000 \
\text { Hilker } & 500 & \$ 27,500 & \$ 25,500
\end{array}$ 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 20

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...

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 adjust the Allowance to Adjust Long-Term Investments to Market in 2010 is:

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

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:

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 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 receipt of the cash dividend from Burns Corporation is:

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

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 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:

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

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