Chapter 9 – Multiple Choice
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Ace Corporation has a long-term investment in the common stock of another entity. This investment is accounted for as an available-for-sale security. A journal entry to record a $10,000 decline in market value below cost would necessarily involve:CorrectIncorrect
On June 1, Pennell Corporation purchased $100,000 of 9%, 5-year bonds. The bonds are dated June 1, 20X1. The bonds were issued at 96, and pay interest on December 1 and June 1. The entry to record the investment in bonds is:CorrectIncorrect
On April 1, 20X1, Collinge Corporation purchased $100,000 of 7%, 5-year bonds dated April 1, 20X1, at 101. Interest is paid on March 31 and September 30. Assuming use of the straight-line amortization method, the proper amount of income to record on September 30, 20X1 is:CorrectIncorrect
On January 1, 20X2, Miller Corporation purchased $100,000 of 5%, 10-year bonds dated January 1, 20X2, at 98. Interest is paid on June 30 and December 31 of each year. Assuming use of the straight-line amortization method, the proper amount to report for Investment in Bonds at December 31, 20X3 is:CorrectIncorrect
Investor Corporation owns 30% of Investee Corporation. Investee had net earnings of $100,000 during the year and paid dividends of $30,000. Investor’s Investment in Investee account contained a $70,000 balance at the beginning of the year. What would be the correct balance of this account at the end of the year?CorrectIncorrect
Investor Corporation owns 30% of Investee Corporation. Investee had net earnings of $100,000 during the year and paid dividends of $30,000. Investor’s Investment in Investee account contained a $70,000 balance at the beginning of the year. How much dividend income will Investor record?CorrectIncorrect
Mega Corporation owns 100% of Wolf Corporation’s stock. Mega paid $1,000,000 for its investment. At the time of the initial investment, Wolf had total stockholders’ equity of $600,000. All of Wolf’s assets and liabilities were carried at amounts that equaled their fair value, except for a building that was undervalued by $100,000. How much goodwill would you anticipate finding in the consolidated balance sheet?CorrectIncorrect