Advanced Accounting
12th Edition by Hoyle
Schaefer Doupnik Test
Bank
1-1
.
, Chapter
01TheEquityMethodofAccountingforInvestments
MultipleChoiceQuestions
1. Gaw Company owns 15% of the common stock of Trace Corporation and used the fair-
valuemethod to account for this investment. Trace reported net income of $110,000 for 2013
and paiddividends of $60,000 on October 1, 2013. How much income should Gaw recognize on
thisinvestment in2013?
A. $16,500.
B. $9,000.
C. $25,500.
D. $7,500.
1-2
.
,E. $50,000.
1-3
.
, 2. Yaro Company owns 30% of the common stock of Dew Co. and uses the equity method
toaccountfortheinvestment.During2013,Dewreportedincomeof$250,000andpaiddividendsof
$80,000.Thereisnoamortizationassociatedwiththeinvestment.During2013,howmuchincomeshouldY
arorecognizerelatedtothis investment?
A. $24,000.
B. $75,000.
C. $99,000.
D. $51,000.
E. $80,000.
3. On January 1, 2013, Pacer Company paid $1,920,000 for 60,000 shares of Lennon Co.'s
votingcommon stock which represents a 45% investment. No allocation to goodwill or other
specificaccount was made. Significant influence over Lennon was achieved by this acquisition.
Lennondistributedadividendof$2.50pershareduring2013andreportednetincomeof$670,000.Whatw
asthebalanceintheInvestmentinLennonCo.accountfoundinthefinancialrecordsofPacerasofDecem
ber31,2013?
A. $2,040,500.
B. $2,212,500.
C. $2,260,500.
D. $2,171,500.
E. $2,071,500.
1-4
.
12th Edition by Hoyle
Schaefer Doupnik Test
Bank
1-1
.
, Chapter
01TheEquityMethodofAccountingforInvestments
MultipleChoiceQuestions
1. Gaw Company owns 15% of the common stock of Trace Corporation and used the fair-
valuemethod to account for this investment. Trace reported net income of $110,000 for 2013
and paiddividends of $60,000 on October 1, 2013. How much income should Gaw recognize on
thisinvestment in2013?
A. $16,500.
B. $9,000.
C. $25,500.
D. $7,500.
1-2
.
,E. $50,000.
1-3
.
, 2. Yaro Company owns 30% of the common stock of Dew Co. and uses the equity method
toaccountfortheinvestment.During2013,Dewreportedincomeof$250,000andpaiddividendsof
$80,000.Thereisnoamortizationassociatedwiththeinvestment.During2013,howmuchincomeshouldY
arorecognizerelatedtothis investment?
A. $24,000.
B. $75,000.
C. $99,000.
D. $51,000.
E. $80,000.
3. On January 1, 2013, Pacer Company paid $1,920,000 for 60,000 shares of Lennon Co.'s
votingcommon stock which represents a 45% investment. No allocation to goodwill or other
specificaccount was made. Significant influence over Lennon was achieved by this acquisition.
Lennondistributedadividendof$2.50pershareduring2013andreportednetincomeof$670,000.Whatw
asthebalanceintheInvestmentinLennonCo.accountfoundinthefinancialrecordsofPacerasofDecem
ber31,2013?
A. $2,040,500.
B. $2,212,500.
C. $2,260,500.
D. $2,171,500.
E. $2,071,500.
1-4
.
