Test Bank Advanced Accounting 14th Edition by Hoyle

5/10/2020 Assignment Print View




1. Award: 10.00 points




Baker Company owns 15% of the common stock of Charlie Corporation and used the fair-value method to
account for this investment. Charlie reported net income of $120,000 for 2021 and paid dividends of $70,000
on October 1, 2021. How much income should Baker recognize on this investment in 2021?


 $18,000
.
  $10,500
.
 $28,500
.
 $7,500.

 $50,000
.

$70,000 × 0.15 = $10,500

References

Multiple Choice Difficulty: 3 Hard Learning Objective: 01-02 Describe in general the
various methods of accounting for an
investment in equity shares of another
company.


2. Award: 10.00 points




Loeffler Company owns 35% of the common stock of Tetter Co. and uses the equity method to account for the
investment. During 2021, Tetter reported income of $260,000 and paid dividends of $90,000. There is no
amortization associated with the investment. During 2021, how much income should Loeffler recognize related
to this investment?


 $90,000.

  $91,000.

 $122,500
.
 $31,500.

 $59,500.



$260,000 × 0.35 = $91,000

References

Multiple Choice Difficulty: 3 Hard Learning Objective: 01-04 Describe the financial
reporting for equity method investments and
prepare basic equity method journal entries for
an investor.




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