I. True or False

1. An investment accounted for under the equity method would record a reduction in the investment account for the proportionate share of the investees reported net loss.

II. Multiple Choice

1. Miller Corp. purchased $1,000,000 of bonds at 105. The bonds pay interest at the rate of 10%. Miller intends to hold these bonds to maturity. Which of the following statements is false? A. Since the bonds were issued at a premium, the cash interest will be greater than interest revenue. B. Since the bonds were issued at a premium, the book value of the bond investment will decrease. C. The bond investment must be accounted for using the held-to-maturity classification. D. The company would recognize unrealized gains or losses on the bonds under the fair value approach within the income statement.

III. Comprehensive Questions

Contrast the economic effects of a cash dividend (declared and paid) with a stock dividend (declared and issued) on the distributing corporation by completing the following chart by placing " X " where appropriate