Question 1 4 pts

(TCO 1) Tommy Inc. owns 30% of Hill Co. and applies the equity method. During the current year, Tommy bought inventory costing $66,000 and then sold it to Hill for $120,000. At year-end, only $24,000 of merchandise was still being held by Hill. What amount of intercompany inventory profit must be deferred by Tommy?

$6,480

$3,240

$10,800

$16,200

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Question 2 4 pts

(TCO 1) On January 1, 20x1, Danny Company purchased 15% of the voting common stock of Happy Corp. On January 1, 20x3, Danny purchased 28% of Happy's voting common stock. If Danny achieves significant influence with this new investment, how must Danny account for the change to the equity method?

It must use the equity method for 20x3 but should make no changes in its financial statements for 20x1 and 20x2.

It should prepare consolidated financial statements for 20x3.

It must restate the financial statements for 20x1 and 20x2 as if the equity method had been used for those 2 years.

It should record a prior period adjustment at the beginning of 20x3 but should not restate the financial statements for 20x1 and 20x2.

It must restate the financial statements for 20x2 as if the equity method had been used then.

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Question 3 4 pts

(TCO 1) A company should always use the equity method to account for an investment if

it has the ability to exercise significant influence over the operating policies of the investee.

it owns 30% of another company's stock.

it has a controlling interest (more than 50%) of another company's stock.

the investment was made primarily to earn a return on excess cash.

it does not have the ability to exercise significant influence over the operating policies of the investee.

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Question 4 4 pts

(TCO 1) All of the following statements regarding the investment account using the equity method are true, except which?

The investment is recorded at cost.

Dividends received are reported as revenue.

Net income of the investee increases the investment account.

Dividends received reduce the investment account.

Amortization of fair value over cost reduces the investment account.

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Question 5 4 pts

(TCO 1) After allocating cost in excess of book value, which asset or liability would not be amortized over a useful life?

Cost of goods sold

Property plant and equipment

Patents

Goodwill

Bonds payable answer 5 questions with abcd answers , recieve thumbs up