Select the correct answer for each of the following questions. 1. Peel Company received a cash dividend from a common stock investment. Should Peel report an increase in the investment account if it uses the cost method or equity method of accounting? Cost Equity a. No No & Yes Yes c. Yes No d. No Yes
Select the correct answer for each of the following questions. 1. Peel Company received a cash dividend from a common stock investment. Should Peel report an increase in the investment account if it uses the cost method or equity method of accounting? Cost Equity a. No No & Yes Yes c. Yes No d. No Yes
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![E2-1 Multiple-Choice Questions on Use of Cost and Equity Methods [AICPA Adapted]
Select the correct answer for each of the following questions.
1. Peel Company received a cash dividend from a common stock investment. Should Peel
report an increase in the investment account if it uses the cost method or equity method of
accounting?
Cost
Equity
a. No
No
b.
Yes
Yes
C
Yes
d. No
No
Yes
2. In 20X0, Neil Company held the following investments in common stock:
25,000 shares of B&K Inc.'s 100,000 outstanding shares. Neil's level of ownership gives it
the ability to exercise significant influence over the financial and operating policies of B&K
6,000 shares of Amal Corporation's 309,000 outstanding shares.
During 20X0, Neil received the following distributions from its common stock investments:
November 6
November 11
December 26
$30,000 cash dividend from B&K
$1,500 cash dividend from Amal
3 percent common stock dividend from Amal
The closing price of this stock was $115 per share.
What amount of dividend revenue should Neil report for 20X0?
a. $1,500.
b. $4,200.
c. $31,500.
d. $34,200.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fcbcc81fb-163e-4792-b677-b4ae1eee8fca%2Ff1450db2-58e1-45e6-b221-05fbfd04ace1%2F9etmcu_processed.png&w=3840&q=75)
Transcribed Image Text:E2-1 Multiple-Choice Questions on Use of Cost and Equity Methods [AICPA Adapted]
Select the correct answer for each of the following questions.
1. Peel Company received a cash dividend from a common stock investment. Should Peel
report an increase in the investment account if it uses the cost method or equity method of
accounting?
Cost
Equity
a. No
No
b.
Yes
Yes
C
Yes
d. No
No
Yes
2. In 20X0, Neil Company held the following investments in common stock:
25,000 shares of B&K Inc.'s 100,000 outstanding shares. Neil's level of ownership gives it
the ability to exercise significant influence over the financial and operating policies of B&K
6,000 shares of Amal Corporation's 309,000 outstanding shares.
During 20X0, Neil received the following distributions from its common stock investments:
November 6
November 11
December 26
$30,000 cash dividend from B&K
$1,500 cash dividend from Amal
3 percent common stock dividend from Amal
The closing price of this stock was $115 per share.
What amount of dividend revenue should Neil report for 20X0?
a. $1,500.
b. $4,200.
c. $31,500.
d. $34,200.
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