Question
1. Assume that Reliable Networks owns the following long-term available-for-sale investments: Number Cost per Year-end Fair Dividend Company of Shares Share Value per Share per
1. Assume that Reliable Networks owns the following long-term available-for-sale investments:
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Reliable's balance sheet at year end should report
A.investments of $97,200.
B. investments of $82,700.
C. dividend revenue $2,990.
D.unrealized loss of $14,500.
2. On January 1, 2014, Benson Corporation paid $810,000 to purchase 40% of the outstanding stock of Kroger Company. Kroger Company reported net income of $160,000 for the year ending December 31, 2014 and paid cash dividends of $70,000 during 2014. On January 1, 2015, Benson Corporation sells its entire investment in Kroger Company for $1,400,000. Benson Corporation will report a(n):
A.realized gain on the sale of $554,000.
B. unrealized gain on the sale of $554,000.
C.realized gain on the sale of $590,000.
D.unrealized gain on the sale of $590,000.
3.An investor owns 34% of the outstanding common stock of Leshan Company. Leshan Company reports net income of $60,000 for the current year. What journal entry should the investor prepare?
A. debit Cash for $20,400 and credit EquityMethod Investment for $20,400.
B. debit Cash for $20,400 and credit Dividend Revenue for $20,400.
C. debit EquityMethod Investment Revenue for $20,400 and credit EquityMethod Investment for $20,400.
D. debit EquityMethod Investment for $20,400 and credit EquityMethod Investment Revenue for $20,400.
4. A company has a longterm Investment in AvailableforSale Securities. The intent is to hold the stock investment for many years, but not until maturity. The investor's percentage ownership is 5%. On January 1, 2014, the purchase date, the cost of the stock investment was $96,000. On December 31, 2014, the fair value of the investment is $94,000. An allowance account is used to writedown the investment. On January 10, 2015, the investor sold the stock for $89,200. What journal entries are required on January 10, 2015?
A. debit Allowance to Adjust Investment in AvailableforSale Securities to Market for $2,000 and credit Unrealized Loss on Investment in AvailableforSale Securities for $2,000
B. debit Cash for $89,200, debit Loss on Sale of Investment in AvailableforSale Securities for $4,800 and credit Investment in AvailableforSale Securities for $96,000
C.debit Cash for $89,200, debit Loss on Sale of Investment of AvailableforSale Securities for $4,800 and credit Investment in AvailableforSale Securities for $94,000
D. A and B
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