Accounting 210 Chapter 16 quiz

A company pays $600,000 for 30% of the common stock of Janet Jackson, Inc. in the first year, Jackson, Inc reports net income of $80,000 and pays a cash dividend of $30,000. the balance of the investments-JAckson, Inc at year end under the equity method is: A. $585,000 B. $615,000 C. $624,000 D. $650,000

B.

At the end of the year, a trading security has a cost of $24,000 and a fair market value of $21,500. the unrealized gain or loss to be recognized is: A. $2,500 gain B. $2,500 loss C. -0- D. none of the above

B.

Revenue is recognized when cash dividends are received under A. the controlling interest method B. the cost method C. the equity method D. both the cost and equity method

B.

in the balance sheet, a debit balance in Unrealized Gain or Loss-Equity is reported as a(n): A. increase to stockholders' equity B. decrease to stockholders' equity C. loss in the income statement D. loss in the retained earnings statement

B.

As a temporary investment, ABC Corporation purchased 1,000 shares of NBC common stock at $60 per share plus $1,200 in brokerage fees. the shares were sold at $65 per share less $1,400 in brokerage fees. the realized gain or loss on the sale was: A. $5,000 gain B. 3,600 gain C. 2,400 gain D. none of the above

C.

At the end of the first year of operations, the total cost of the trading securities portfolio is $120,000. total fair market value is $115,000. the financial statements should show: A. a reduction of an asset of $5,000 and a realized loss of $5,000 B. a reduction of an asset of $5,000 and an unrealized loss of $5,000 in the stockholders' equity section C. a reduction of an asset of $5,000 in the current assets section and an unrealized loss of $5,000 in "Other expenses and losses" D. a reduction of an asset of $5,000 in the current assets section and a realized loss of $5,000 in "Other expenses and losses"

C.

Which of the following would NOT appear in an income statement? A. unrealized gain on trading securities B. realized gain on available-for-sale securities C. unrealized loss on available-for-sale securities D. realized loss on trading securities

C.

Consolidated financial statements are prepared when a company owns ___ of the common stock of another company. A. less than 20% B. between 20% and 50% C. less than 50% D. more than 50%

D.

Corporations invest in other companies for all of the following reasons except to A. house excess cash until needed B. generate earnings C. meet strategic goals D. increase trading of the other companies' stock

D.

the equity method is used when the investor A. makes long term investments in stocks B. plans to sell the investments within 1 year C. owns less than 20% of the investee's common stock D. owns between 20% and 50% of the investee's common stock

D.