DOWNLOAD THE Test Bank for Advanced Accounting 14th Edition Hoyle
Advanced Accounting 14th Hoyle Chapter 01
Correct answers are located at the 2nd half this document
MULTIPLE CHOICE - Choose the one alternative that best completes the statement or
answers the question.
1) 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?
1) ______
A) $18,000.
B) $10,500.
C) $28,500.
D) $7,500.
E) $50,000.
Question Details
Accessibility : Keyboard Navigation
Bloom's : Apply
AICPA : BB Critical Thinking
AICPA : FN Measurement
Learning Objective : 01-02 Describe in general the various methods of accounting for an investment in
Gradable : automatic
Difficulty : 3 Hard
AACSB : Knowledge Application
Accessibility : Screen Reader Compatible
Topic : Accounting for Investments―Various Methods
2) 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?
2) ______
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,DOWNLOAD THE Test Bank for Advanced Accounting 14th Edition Hoyle
Advanced Accounting 14th Hoyle Chapter 01
A) $90,000.
B) $91,000.
C) $122,500.
D) $31,500.
E) $59,500.
Question Details
Accessibility : Keyboard Navigation
Bloom's : Apply
AICPA : BB Critical Thinking
AICPA : FN Measurement
Learning Objective : 01-04 Describe the financial reporting for equity method investments and prepare
Gradable : automatic
Difficulty : 3 Hard
AACSB : Knowledge Application
Accessibility : Screen Reader Compatible
Topic : Equity Method―Basic Journal Entries
3) On January 1, 2021, Lee Company paid $1,870,000 for 80,000 shares of Thomas Co.’s
voting common stock which represents a 45% investment. No allocation to goodwill or other
specific account was necessary. Significant influence over Thomas was achieved by this
acquisition. Thomas distributed a dividend of $2.00 per share during 2021 and reported net
income of $720,000. What was the balance in the Investment in Thomas Co. account found in the
financial records of Lee as of December 31, 2021?
3) ______
A) $2,114,000.
B) $2,194,000.
C) $2,354,000.
D) $2,158,000.
E) $2,034,000.
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,DOWNLOAD THE Test Bank for Advanced Accounting 14th Edition Hoyle
Advanced Accounting 14th Hoyle Chapter 01
Question Details
Accessibility : Keyboard Navigation
Bloom's : Apply
AICPA : BB Critical Thinking
AICPA : FN Measurement
Learning Objective : 01-04 Describe the financial reporting for equity method investments and prepare
Gradable : automatic
Difficulty : 3 Hard
AACSB : Knowledge Application
Accessibility : Screen Reader Compatible
Topic : Equity Method―Investment Account Balance
4) A necessary condition to use the equity method of reporting for an equity investment is
that the investor company must
4) ______
A) have the ability to exercise significant influence over the operating and financial
policies of the investee.
B) own at least 30% of the investee's voting stock.
C) possess a controlling interest in the investee's voting stock.
D) not have the ability to exercise significant influence over the operating and financial
policies of the investee.
Question Details
Accessibility : Keyboard Navigation
AICPA : BB Critical Thinking
AICPA : FN Measurement
Bloom's : Remember
AACSB : Reflective Thinking
Learning Objective : 01-03 Identify the sole criterion for applying the equity method of accounting a
Gradable : automatic
Difficulty : 1 Easy
Accessibility : Screen Reader Compatible
Topic : Equity Method―Significant Influence Criterion
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Advanced Accounting 14th Hoyle Chapter 01
5) On January 1, 2019, Dermot Company purchased 15% of the voting common stock of
Horne Corp. On January 1, 2021, Dermot purchased 28% of Horne’s voting common stock. If
Dermot achieves significant influence with this new investment, how must Dermot account for
the change to the equity method?
5) ______
A) It must use the equity method for 2021 but should make no changes in its financial
statements for 2020 and 2019.
B) It should prepare consolidated financial statements for 2021.
C) It must restate the financial statements for 2020 and 2019 as if the equity method had
been used for those two years.
D) It should record a prior period adjustment at the beginning of 2021 but should not
restate the financial statements for 2020 and 2019.
E) It must restate the financial statements for 2020 as if the equity method had been
used then.
Question Details
Accessibility : Keyboard Navigation
AICPA : BB Critical Thinking
AICPA : FN Measurement
Bloom's : Understand
Learning Objective : 01-06a Understand the financial reporting consequences for a change to the equit
Gradable : automatic
Difficulty : 2 Medium
AACSB : Analytical Thinking
Topic : Report Change to Equity Method
Accessibility : Screen Reader Compatible
6) During January 2020, Nelson, Inc. acquired 30% of the outstanding common stock of
Fuel Co. for $1,600,000. This investment gave Nelson the ability to exercise significant
influence over Fuel. Fuel’s assets on that date were recorded at $7,200,000 with liabilities of
$3,400,000. Any excess of cost over book value of Nelson’s investment was attributed to
unrecorded patents having a remaining useful life of ten years.
In 2020, Fuel reported net income of $650,000. For 2021, Fuel reported net income of
$800,000. Dividends of $250,000 were paid in each of these two years. What was the reported
balance of Nelson’s Investment in Fuel Co. at December 31, 2021?
6) ______
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Advanced Accounting 14th Hoyle Chapter 01
Correct answers are located at the 2nd half this document
MULTIPLE CHOICE - Choose the one alternative that best completes the statement or
answers the question.
1) 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?
1) ______
A) $18,000.
B) $10,500.
C) $28,500.
D) $7,500.
E) $50,000.
Question Details
Accessibility : Keyboard Navigation
Bloom's : Apply
AICPA : BB Critical Thinking
AICPA : FN Measurement
Learning Objective : 01-02 Describe in general the various methods of accounting for an investment in
Gradable : automatic
Difficulty : 3 Hard
AACSB : Knowledge Application
Accessibility : Screen Reader Compatible
Topic : Accounting for Investments―Various Methods
2) 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?
2) ______
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,DOWNLOAD THE Test Bank for Advanced Accounting 14th Edition Hoyle
Advanced Accounting 14th Hoyle Chapter 01
A) $90,000.
B) $91,000.
C) $122,500.
D) $31,500.
E) $59,500.
Question Details
Accessibility : Keyboard Navigation
Bloom's : Apply
AICPA : BB Critical Thinking
AICPA : FN Measurement
Learning Objective : 01-04 Describe the financial reporting for equity method investments and prepare
Gradable : automatic
Difficulty : 3 Hard
AACSB : Knowledge Application
Accessibility : Screen Reader Compatible
Topic : Equity Method―Basic Journal Entries
3) On January 1, 2021, Lee Company paid $1,870,000 for 80,000 shares of Thomas Co.’s
voting common stock which represents a 45% investment. No allocation to goodwill or other
specific account was necessary. Significant influence over Thomas was achieved by this
acquisition. Thomas distributed a dividend of $2.00 per share during 2021 and reported net
income of $720,000. What was the balance in the Investment in Thomas Co. account found in the
financial records of Lee as of December 31, 2021?
3) ______
A) $2,114,000.
B) $2,194,000.
C) $2,354,000.
D) $2,158,000.
E) $2,034,000.
Version 1 2
mynursytest.store
,DOWNLOAD THE Test Bank for Advanced Accounting 14th Edition Hoyle
Advanced Accounting 14th Hoyle Chapter 01
Question Details
Accessibility : Keyboard Navigation
Bloom's : Apply
AICPA : BB Critical Thinking
AICPA : FN Measurement
Learning Objective : 01-04 Describe the financial reporting for equity method investments and prepare
Gradable : automatic
Difficulty : 3 Hard
AACSB : Knowledge Application
Accessibility : Screen Reader Compatible
Topic : Equity Method―Investment Account Balance
4) A necessary condition to use the equity method of reporting for an equity investment is
that the investor company must
4) ______
A) have the ability to exercise significant influence over the operating and financial
policies of the investee.
B) own at least 30% of the investee's voting stock.
C) possess a controlling interest in the investee's voting stock.
D) not have the ability to exercise significant influence over the operating and financial
policies of the investee.
Question Details
Accessibility : Keyboard Navigation
AICPA : BB Critical Thinking
AICPA : FN Measurement
Bloom's : Remember
AACSB : Reflective Thinking
Learning Objective : 01-03 Identify the sole criterion for applying the equity method of accounting a
Gradable : automatic
Difficulty : 1 Easy
Accessibility : Screen Reader Compatible
Topic : Equity Method―Significant Influence Criterion
Version 1 3
mynursytest.store
, DOWNLOAD THE Test Bank for Advanced Accounting 14th Edition Hoyle
Advanced Accounting 14th Hoyle Chapter 01
5) On January 1, 2019, Dermot Company purchased 15% of the voting common stock of
Horne Corp. On January 1, 2021, Dermot purchased 28% of Horne’s voting common stock. If
Dermot achieves significant influence with this new investment, how must Dermot account for
the change to the equity method?
5) ______
A) It must use the equity method for 2021 but should make no changes in its financial
statements for 2020 and 2019.
B) It should prepare consolidated financial statements for 2021.
C) It must restate the financial statements for 2020 and 2019 as if the equity method had
been used for those two years.
D) It should record a prior period adjustment at the beginning of 2021 but should not
restate the financial statements for 2020 and 2019.
E) It must restate the financial statements for 2020 as if the equity method had been
used then.
Question Details
Accessibility : Keyboard Navigation
AICPA : BB Critical Thinking
AICPA : FN Measurement
Bloom's : Understand
Learning Objective : 01-06a Understand the financial reporting consequences for a change to the equit
Gradable : automatic
Difficulty : 2 Medium
AACSB : Analytical Thinking
Topic : Report Change to Equity Method
Accessibility : Screen Reader Compatible
6) During January 2020, Nelson, Inc. acquired 30% of the outstanding common stock of
Fuel Co. for $1,600,000. This investment gave Nelson the ability to exercise significant
influence over Fuel. Fuel’s assets on that date were recorded at $7,200,000 with liabilities of
$3,400,000. Any excess of cost over book value of Nelson’s investment was attributed to
unrecorded patents having a remaining useful life of ten years.
In 2020, Fuel reported net income of $650,000. For 2021, Fuel reported net income of
$800,000. Dividends of $250,000 were paid in each of these two years. What was the reported
balance of Nelson’s Investment in Fuel Co. at December 31, 2021?
6) ______
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