y. 000 Des: 19. When bond interest payments are sent to the owner of the bonds by the debtor, the bonds are O bol ni tai called a. Participating bonds. b. Coupon bonds. Registered bonds d. Debenture bonds. C. 20. Bonds that investors may present for payment prior to maturity are a. Callable bonds. b. Redeemable bonds. c. Convertible bonds. d. Income bonds. 21. X Company has not elected the fair value option. Under what circumstances should X account for each investment using the equity method? owns 15% of the voting stock of Y Co, and 25% of the voting stock of Z Co. X Investment in Z In all cases In all cases Investment in Y In all cases a Never Only if X has the ability to exercise significant Influence over 2 Never Only if X has the ability to significantly In most cases unless there are indications that X does not have the influence 2 ability to exercise significant over Z 22. On January 2, Well Co. purchased 10 % of Rea. Inc.'s outstanding which equaled the carrying amount and the fair value of the interest purchased in Rea's net assets. Well did not elect the fair value option. Well is the largest single shareholder in Rea, and Well's officers are a majority on Rea's board of directors. Rea reported net income of $500,000 for the year and paid dividends of $150,000. In its December 31 balance sheet, what amount should Well report as investment in Rea? a. $450,000 b. $435,000 c. $400,000 d. $385,000 common shares for $400,000, Equity investment Cash 400,000 400,000 50,000 Equity investment Equity income Cash Equity investmept 23. A corporation that uses the equity method of accounting for-its investment-in-a-40% owned 50,000 15,000 15,000 investee that earned $20,000 and paid $5,000 in dividends made the following entries: 8,000 Investment in subsidiary Equity in earnings of subsidiary 8,000 2,000 Cash 2,000 Dividend revenue What effect will these entries have on the parent's statement of financial position? A. Investment understated, retained earnings understated. B. Investment overstated, retained earnings overstated. C. Investment overstated, retained earnings understated. D. Financial position will be fairly stated