Ch17 Acct302 MC

Information pertaining to dividends from Wray Corp.'s common stock investments for the year ended December 31, 2017 are as follows:• On September 8, 2017, Wray received a $50,000 cash dividend from Seco, Inc., in which Wray owns a 30% interest. A majority of Wray's directors are also directors of Seco.• On October 15, 2017, Wray received a $6,000 dividend from King Co. Wray owns a 5% in King Co.• Wray owns a 2% interest in Bow Corp., which declared a $200,000 cash dividend on November 27, 2017 to stockholders of record on December 15, 2017, payable on January 5, 2018.Wray has a passive interest in King Co. and Bow Corp.What amount should Wray report as dividend income in its Income Statement for the year ended December 31, 2017? $10,000 $4,000 $56,000 $60,000

$10,000

On January 1, Year 2, Miller Company purchased 25% of Wall Corporation's common stock; no goodwill resulted from the purchase. Miller uses the equity method to account for this investment, and the balance in Miller's investment account was $190,000 at December 31, Year 2. Wall reported net income of $120,000 for the year ended December 31, Year 2, and paid common stock dividends totaling $48,000 during Year 2. How much did Miller pay for its 25% interest in Wall? $208,000 $202,000 $232,000 $172,000

$172,000

On January 1, Year 1, Justo purchases 30,000 shares of the 100,000 outstanding shares of stock in Bonita Corp. for $5 per share. During the year, Bonita Corporation has $20,000 of net income and pays $4,000 in dividends. On December 31, Year 1, the value of a share of Bonita Corporation stock is $6 per share. Assuming Justo elects the fair value option to account for its investment in Bonita, what is the amount recorded as Investment in Bonita on the December 31, Year 1, balance sheet? $154,800 $156,000 $150,000 $180,000

$180,000

Pare, Inc. purchased 10% of Tot Co.'s 100,000 outstanding shares of common stock on January 2, Year 1, for $50,000.On December 31, Year 1, Pare purchased an additional 20,000 shares of Tot for $150,000. There was no goodwill as a result of either acquisition, and Tot had not issued any additional stock during Year 1. Stake did not give Pare, Inc. significant influence over the operating and financial policies of Tot Co.What amount should Pare report in its December 31, Year 1, Balance Sheet as investment in Tot? $170,000 $230,000 $290,000 $200,000

$200,000

Grant, Inc. acquired 30% of South Co.'s voting stock for $200,000 on January 2, 2015.Grant's 30% interest in South gave Grant the ability to exercise significant influence over South's operating and financial policies. During 2015, South earned $80,000 and paid dividends of $50,000. South reported earnings of $100,000 for the six months ended June 30, 2016, and $200,000 for the year ended December 31, 2016. On July 1, 2016, Grant sold half of its stock in South for $150,000 cash. South paid dividends of $60,000 on October 1, 2016.Before income taxes, what amount should Grant include in its 2015 Income Statement as a result of the investment? $24,000 $80,000 $50,000 $15,000

$24,000 (.30 × $80,000)

Rosenblum Company's trading securities portfolio which is appropriately included in current assets is as follows: December 31, 2017 CostFair ValueUnrealized Gain (Loss)Boston Corp.$450,000$421,000$(29,000)Greening, Inc.233,000 255,00022,000 $683,000 $676,000$(7,000) Ignoring income taxes, what amount should be reported as a charge against income in Rosenblum's 2017 income statement if 2017 is Rosenblum's first year of operation? $29,000. $22,000. $7,000. $0.

$7,000.

Accounting and reporting for equity securities where the company has 20 - 50% ownership uses which of the following methods? Equity. Consolidation. Amortized cost. Fair value.

Equity.

When an investor company owns 25% of an investee company's common stock, the investor is said to have: a minor influence over the investee company. little or no influence over the investee company. a controlling interest over the investee company. a significant influence over the investee company.

a significant influence over the investee company.

A requirement for a security to be classified as held-to-maturity is ability to hold the security to maturity. positive intent. the security must be a debt security. all of these answer choices are correct.

all of these answer choices are correct.

Debt securities may be classified as: held-to-maturity. trading. available-for-sale. all of these answer choices are correct.

all of these answer choices are correct.

Examples of the ability to exercise significant influence over an investee include all of the following except: material intercompany transactions. interchange of managerial personnel. technological dependency. all of these answer choices are examples of significant influence.

all of these answer choices are examples of significant influence.

When an available-for-sale debt security is sold, the gain (loss) on sale is the difference between the net proceeds from the sale and the security's: face value. amortized cost. par value. fair value.

amortized cost

Held-to-maturity securities are reported at their: net realizable value. historical cost. amortized cost. fair value.

amortized cost.

Investments in debt securities should be recorded on the date of acquisition at market value. cost plus brokerage fees and other costs incidental to the purchase. maturity value plus brokerage fees and other costs incidental to the purchase. lower of cost or market.

cost plus brokerage fees and other costs incidental to the purchase.

A correct valuation is none of these answer choices are correct. available-for-sale securities at amortized cost. trading securities at amortized cost. held-to-maturity securities at amortized cost.

held-to-maturity securities at amortized cost.

When an investment in a held-to-maturity security is transferred to an available-for-sale security, the carrying value assigned to the available-for-sale security should be the lower of its original cost or its fair value at the date of the transfer. the higher of its original cost or its fair value at the date of the transfer. its fair value at the date of the transfer. its original cost.

its fair value at the date of the transfer.

Unrealized gains and losses on held-to-maturity securities are: reported on the balance sheet. reported on the income statement. not recognized because these securities are reported at their amortized cost. none of these answer choices are correct.

not recognized because these securities are reported at their amortized cost.

The unrealized holding gain or loss on trading securities is reported as: other comprehensive income. a separate component of stockholders' equity. part of net income. an addition to (deduction from) the trading securities account balance.

part of net income.

Unrealized gains and losses on available-for-sale securities are: reported on the balance sheet. reported on the income statement. not reported because these securities are reported at their amortized cost. none of these answer choices are correct.

reported on the balance sheet.