Ch 17 Q Acct302

On its December 31, 2020 balance sheet, Crane Company appropriately reported a $10,000 debit balance in its Fair Value Adjustment account. There was no change during 2021 in the composition of Crane's portfolio of debt investments held as available-for-sale debt securities. The following information pertains to that portfolio: Security Cost Fair value at 12/31/21 X $152000 $193000 Y 122000 106500 Z 219000169000 $493000$468500 The amount of unrealized loss to appear as a component of comprehensive income for the year ending December 31, 2021 is $41000. $25500. $0. $34500.

$10,000 + ($493000 - $468500) = $34500.

Sunland Corporation has the following investment which was held throughout 2021-2022: Fair Value Cost 12/31/21 12/31/22Equity investment $948000 $1254000 $1200000 What amount of gain or loss would Sunland Corporation report in its income statement for the year ended December 31, 2022 related to its investment, if the fair value method of accounting was used? $54000 loss. $252000 gain. $54000 gain. $306000 gain.

$1254000 - $1200000 = $54000 loss.

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 $172,000 $202,000 $232,000

$172,000

Sunland Corporation began operations in 2021. An analysis of Sunland's debt securities portfolio acquired in 2021 shows the following totals at December 31, 2021 for trading and available-for-sale debt securities: TradingSecurities Available-for-SaleSecuritiesAggregate cost $174000 $214000 Aggregate fair value 151600 181000 What amount should Sunland report in its 2021 income statement for unrealized holding loss? $55400. $29400. $22400. $10600.

$174000 - $151600 = $22400.

Pharoah Company owns 4400 of the 10000 outstanding shares of Wildhorse Corporation common stock. During 2021, Wildhorse earns $490000 and pays cash dividends of $154000.Pharoah should report investment revenue for 2021 of $67760. $147840. $154000. $215600.

$215600.

On January 3, 2020, Sheridan Company acquires $430000 of Adam Company's 10-year, 10% bonds at a price of $462090 to yield 9%. Interest is payable each December 31. The bonds are classified as held-to-maturity.Assuming that Sheridan Company uses the effective-interest method, what is the amount of interest revenue that would be recognized in 2021 related to these bonds? $41461 $43000 $41588 $46209

($462090 × 0.090) - ($430000 × 0.10) = $-1412 - 2020 Amortization($462090 - $1412) × 0.090 = $41461 - 2021 Interest Revenue.

When a company holds between 20% and 50% of the outstanding stock of an investee, which of the following statements applies? The investor should always use the equity method to account for its investment. The investor should use the equity method to account for its investment unless circumstances indicate that it is unable to exercise "significant influence" over the investee. The investor must use the fair value method unless it can clearly demonstrate the ability to exercise "significant influence" over the investee. The investor should always use the fair value method to account for its investment.

The investor should use the equity method to account for its investment unless circumstances indicate that it is unable to exercise "significant influence" over the investee.

Watt Company purchased $300,000 of bonds for $315,000. If Watt intends to hold the securities to maturity, the entry to record the investment includes a debit to Debt Investments at $300,000. a credit to Premium on Debt Investments of $15,000. a debit to Debt Investments at $315,000. none of these choices are correct.

a debit to Debt Investments at $315,000.

Transfers between categories are accounted for at fair value for all transfers. result in companies omitting recognition of fair value in the year of the transfer. are considered unrealized and unrecognized if transferred out of held-to-maturity into trading. will always result in an impact on net income.

are accounted for at fair value for all transfers.

Debt securities acquired by a corporation which are accounted for by recognizing unrealized holding gains or losses that are included as other comprehensive income and as a separate component of stockholders' equity are trading debt securities. held-to-maturity debt securities. available-for-sale debt securities. never-sell debt securities.

available-for-sale debt securities.

GAAP specifies that, regarding the amortization of a premium or discount on a debt security, the effective-interest method of allocation must be used. straight-line method of allocation must be used. effective-interest method of allocation should be used but other methods can be applied if there is no material difference in the results obtained. par value method must be used and therefore no allocation is necessary.

effective-interest method of allocation should be used but other methods can be applied if there is no material difference in the results obtained.

Securities which could be classified as held-to-maturity are warrants. municipal bonds. treasury stock. redeemable preferred stock.

municipal bonds.

Under the equity method, if an investee company generates net income, the investor company: records its proportionate share of the net income as dividend income. does not recognize any share of the net income. records its proportionate share as an increase in its investment account. records its proportionate share as an unrealized gain.

records its proportionate share as an increase in its investment account.

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.

Equity securities acquired by a corporation which are accounted for by recognizing unrealized holding gains or losses are securities where a company has holdings of more than 50%. securities where a company has holdings of between 20% and 50%. securities where a company has holdings of more than 20%. securities where a company has holdings of less than 20%.

securities where a company has holdings of less than 20%.

Unrealized holding gains or losses which are recognized in income are from debt securities classified as held-to-maturity. available-for-sale. trading. none of these answers are correct.

trading.