ACCT - Chapter 17 (CPA)

On January 1, 2018, Reston Company purchased 25% of Ace Corporation's common stock; no goodwill resulted from the purchase. Reston appropriately carries this investment at equity and the balance in Reston's investment account was $1,170,000 at December 31, 2018. Ace reported net income of $700,000 for the year ended December 31, 2018, and paid cash dividends on common stock totaling $280,000 during 2018. How much did Reston pay for its 25% interest in Ace? a. $1,065,000. b. $1,240,000. c. $1,275,000. d. $1,415,000.

a. $1,065,000.

The carrying amount of this investment in Rich's December 31, 2018 balance sheet should be a. $1,000,000. b. $1,045,000. c. $1,120,000. d. $1,150,000.

b. $1,045,000.

On December 31, 2018, Patel transferred its investment in security C from trading to available-for-sale because Patel intends to retain security C as a long-term investment. What total amount of gain or loss on its securities should be included in Patel's income statement for the year ended December 31, 2018? a. $1,000 gain. b. $24,000 loss. c. $25,000 loss. d. $38,000 loss.

b. $24,000 loss.

Before income taxes, what amount should Rich include in its 2018 income statement as a result of the investment? a. $400,000. b. $250,000. c. $120,000. d. $75,000.

c. $120,000.

What should the gain be on sale of this investment in Rich's 2019 income statement? a. $160,000. b. $137,500. c. $122,500. d. $100,000.

c. $122,500.

All market declines are considered temporary. Fair value adjustments at December 31, 2018 should be established with a corresponding charge against Income Stockholders' Equity a. $40,000 $ 0 b. $25,000 $30,000 c. $15,000 $20,000 d. $15,000 $ 0

c. $15,000 $20,000

Valet Corporation began operations in 2018. An analysis of Valet's debt securities portfolio acquired in 2018 shows the following totals at December 31, 2018 for trading and available-for-sale debt securities: Trading Available-for-Sale Securities Securities Aggregate cost $180,000 $220,000 Aggregate fair value 160,000 190,000 What amount should Valet report in its 2018 income statement for unrealized holding loss? a. $50,000. b. $10,000. c. $30,000. d. $20,000.

d. $20,000.

On October 1, 2017, Wenn Company purchased 800 of the $1,000 face value, 8% bonds of Loy, Inc., for $936,000, including accrued interest of $16,000. The bonds, which mature on January 1, 2024, pay interest semiannually on January 1 and July 1. Wenn used the straight-line method of amortization and appropriately recorded the bonds as available-for-sale. On Wenn's December 31, 2018 balance sheet, the carrying value of the bonds is a. $920,000. b. $912,000. c. $908,800. d. $896,000.

d. $896,000.

On December 29, 2019, James Company sold a debt security that had been purchased on January 4, 2018. James owned no other debt securities. An unrealized holding loss was reported in the 2018 income statement. A realized gain was reported in the 2019 income statement. Was the debt security classified as available-for-sale and did its 2018 market price decline exceed its 2019 market price recovery? 2018 Market Price Decline Exceeded 2019 Available-for-Sale Market Price Recovery a. Yes Yes b. Yes No c. No Yes d. No No

d. No No