11 The Kerry Company began operations during 2014 and purchased shares of Molson Corporation stock during the year. The market value of the Molson stock had increased as of the end of 2014. Kerry should have classified this investment as a trading security but mistakenly classified it as an available-for-sale security. Which of the following properly describes the impact of this error?

The 2014 net income was not misstated.

Total assets as of December 31, 2014 were understated.

Total stockholders' equity as of December 31, 2014 was understated.

Total stockholders' equity as of December 31, 2014 was not misstated.

12 Perry Investments bought 2,000 shares of Able, Inc. common stock on January 1, 2015, for $20,000 and 2,000 shares of Baker, Inc. common stock on July 1, 2015 for $24,000. Baker paid $2,400 of previously declared dividends to Perry on December 31, 2015. At the end of 2015, the market value of the Able stock was $18,000 and the market value of

the Baker stock was $28,000. The stocks were purchased for short-term speculation. Perry owns 10% of each company.

Perry should record the year-end adjustment as:

DRFair value adjustmentTrading securities 2,000

CRUnrealized holding gain on

trading securitiesIncome 2,000

DRUnrealized holding gain on trading

securitiesIncome 2,000

CRFair value adjustment

Trading securities 2,000

DRFair value adjustmentTrading securities 2,000

CRUnrealized holding loss on trading

securitiesIncome 2,000

DRFair value adjustmentTrading securities 2,000

CRRealized holding gain on

trading securities 2,000

13 On January 1, 2015, the Shaw Corporation purchased 70% of the Ward Company's voting stock for $1,050,000. Ward's net assets had a book value of $1,200,000; the fair value of Ward's equipment was $200,000 greater than its book value. The book value of Shaw's assets immediately after the acquisition of Ward totaled $3,750,000 while Ward's assets had a book value of $2,150,000. Assuming that Shaw used the acquisition method to prepare its consolidated balance sheet, what was total consolidated assets as of January 1, 2015?

$5,150,000

$6,200,000

$5,050,000

$4,850,000

14 Which of the following statements does NOT accurately describe the current accounting standards for goodwill?

If the fair value of the reporting unit is greater than its book value there is not a goodwill impairment.

Goodwill should not be amortized.

If the fair value of the reporting unit is less than its book value there will always be a goodwill impairment.

Goodwill should be tested for impairment on at least an annual basis and in certain conditions between annual dates.

15 The unrealized holding gain or loss on trading securities is recorded on

the:

income statement in the period after the security price change.

income statement in the period of the security price change.

balance sheet as a deferred charge in the period of the security price change.

balance sheet as a separate component of stockholders' equity.