Test bank for advanced accounting
14th edition hoyle
,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)
Version 1 1
, 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
, 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
14th edition hoyle
,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)
Version 1 1
, 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
, 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
