CHOOSE THE BEST ANSWER ACCOUNTING PROBLEMS

|I CHOOSE THE BEST ANSWER 1) The cost method to account for the investment in shares will be used when: a) The investor purchases more than 50% of the shares. b) Buying the shares gives the buyer signicant inuence. c) The market value of the shares is higher than their cost. d) The inuence of the buyer in the corporation that issues the shares is not signicant. 2) Among the advantages of issuing Bonds instead of shares are: a) The Bondholders do not have the right to vote. This allows current shareholders to retain control of the corporation. b) The Bond Interest Expense is deductible for tax purposes. c) None of the above. d) The (a) and (b) 3) If the investor bought less than 20% of the shares: a) The Equity Method is used to account for the investment. b) The payment of dividends should not be expected. c) It is presumed that the investor has little inuence on the decisions of the other corporation. d) The investor is presumed to have signicant inuence over the other corporation. 4) When the Cost Method is used to account for the investment in common shares, the dividends received are: a) They credit the Stock Investment account. b) Credit to the Dividend Revenue account c) They debit the Stock Investment account d) Note only when you own 20% or more of the shares. 5) When the Equity Method is used, the dividend received is: a) Credit the Dividend Revenue account b) Debits the Stock Investment account c) Credit the Stock Investment account d) No wage entry is made