Question 32 On January 1, 2013, Pansy Company acquired a 10% interest in Sunflower Corporation for $80,000 when Sunflower's stockholders' equity consisted of $400,000 capital stock and $100,000 retained earnings. Book values of Sunflower's net assets equaled their fair values on this date. Sunflower's net income and dividends for 2013 through 2015 were as follows: 2013 2014 2015 Net income $ 8,000 $ 10,000 $15,000 Dividends paid 5,000 5,000 5,000 Assume that Pansy Incorporated used the cost method of accounting for its investment in Sunflower. The balance in the Investment in Sunflower account at December 31, 2015 was Answers: A. $76,700. B. $95,000. C. $80,000. D. $83,300
- Question 32
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On January 1, 2013, Pansy Company acquired a 10% interest in Sunflower Corporation for $80,000 when Sunflower's
2013 2014 2015 Net income $ 8,000 $ 10,000 $15,000 Dividends paid 5,000 5,000 5,000
Assume that Pansy Incorporated used the cost method of accounting for its investment in Sunflower. The balance in the Investment in Sunflower account at December 31, 2015 was |
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- Question 33
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Which one of the following items, originally recorded in the Investment in Falcon Co. account under the equity method, would not be systematically used to reduce investment income on a periodic basis? |
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- Question 34
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Assume that Pansy has significant influence and uses the equity method of accounting for its investment in Sunflower. The balance in the Investment in Sunflower account at December 31, 2015 was |
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- Question 35
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Bart Company purchased a 30% interest in Simpson Corporation on January 1, 2013, and Bart accounted for its investment in Simpson under the equity method for the next 3 years. On January 1, 2016, Bart sold one-half of its interest in Simpson after which it could no longer exercise significant influence over Simpson. Bart should |
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- Question 36
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Which method of accounting will generally be used when one company purchases less than 20% of the outstanding stock of another company? |
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- Question 37
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In reference to intercompany transactions between an investor and an investee, when the investor can significantly influence the investee, which of the following statements is correct, assuming that the investor is using the equity method? |
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- Question 38
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Pepper Company paid $2,500,000 for the net assets of Salt Corporation and Salt was then dissolved. Salt had no liabilities. The fair values of Salt's assets were $3,750,000. Salt's only non-current assets were land and buildings with book values of $100,000 and $520,000, respectively, and fair values of $180,000 and $730,000, respectively. At what value will the buildings be recorded by Pepper? |
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