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Questions
Q:
PQTC$1310$8$1215$30$1120$68$1025$128$930$208$835$308Refer to the above table. Given the demand and cost schedules, what is the profit maximizing quantity for this monopolist?A) 15 B) 20 C) 25 D) 30
Q:
On July 1, 2011, Polliwog Incorporated paid cash for 21,000 shares of Salamander Company's $10 par value stock, when it was trading at $22 per share. At that time, Salamander's total stockholders' equity was $597,000, and they had 30,000 shares of stock outstanding, both before and after the purchase. The book value of Salamander's net assets is believed to approximate the fair values.
Requirement 1: Prepare the journal entry that Polliwog would record at the date of acquisition on their general ledger.
Requirement 2: Calculate the balance of the goodwill that would be recorded on Polliwog's general ledger, on Salamander's general ledger, and in the consolidated financial statements.
Q:
Match the following definitions and terms by placing the letter that identifies the best definition in the blank space next to the term.a. A simple form used as a helpful tool in understanding the effect of transactions and events on specific accounts.b. The most flexible type of journal, it can be used to record any kind of transaction.c. A journal entry that affects at least three accounts.d. A written promise from a customer to pay a definite sum of money on a specified future date.e. A record of the increases and decreases in a specific asset, liability, equity, revenue, or expense item.f. A list of all accounts used by a company and the identification number assigned to each account.g. The process of transferring journal entry information to the ledger.h. A list of accounts and their balances at a point in time; the total debit balances should equal the total credit balances.i. A column in journals where individual account numbers are entered when entries are posted to ledger accounts.j. Liabilities created when customers pay in advance for products or services; satisfied by delivering the products or services in the future.1)Account2)General journal3)Posting reference column4)T-account5)Note receivable6)Chart of accounts7)Posting8)Compound journal entry9)Trial Balance10)Unearned revenues
Q:
The motive that drives firms to enter or exit an industry isA) utility. B) governmental.C) economic profit. D) accounting costs.
Q:
Passerby International purchased 80% of Standaround Company's outstanding common stock for $200,000 on January 2, 2011. At that time, the fair value of Standaround's net assets were equal to the book values. The balance sheets of Passerby and Standaround at January 2, 2011 are summarized as follows:
Passerby Standaround
Assets $1,600,000 $470,000
Liabilities $840,000 $230,000
Capital stock 360,000 50,000
Retained earnings 400,000 190,000
Required: Determine the consolidated balances as of January 2, 2011 for the following five balance sheet line items: Goodwill, Liabilities, Capital Stock, Retained Earnings, and Noncontrolling Interest.
Q:
The perfectly competitive, profit-maximizing rate of productionA) occurs at the point at which marginal revenue is equal to marginal cost.B) occurs at the point at which the difference between marginal revenue and marginal cost is maximized.C) is not measurable for a perfectly competitive firm.D) ignores the relation of total revenues and total costs.
Q:
Push-down accounting
A) requires a subsidiary to use the same accounting principles as its parent company.
B) is required when the parent company uses the equity method to account for its investment in a subsidiary.
C) is required when the parent company uses the cost method to account for its investment in a subsidiary.
D) requires the subsidiary to record the subsidiary's assets and liabilities at fair value at the acquisition date.
Q:
The ratio of total costs to the quantity produced is referred to asA) average fixed costs. B) average variable costs. C) marginal costs. D) average total costs.
Q:
In the consolidated income statement of Wattlebird Corporation and its 85% owned Forest subsidiary, the noncontrolling interest share was reported at $45,000. Assume the book value and fair value of Forest's net assets were equal at the acquisition date. What amount of net income did Forest have for the year?
A) $52,941
B) $38,250
C) $235,000
D) $300,000
Q:
Which of the following groups of accounts are not balance sheet accounts?
A.Assets.
B.Liabilities.
C.Revenues.
D.Equity accounts.
E.All of these are balance sheet accounts.
Q:
Which of the following statements about stock market brokers and dealers is TRUE?A) Brokers earn commissions from trading stocks but dealers try to profit from trading stocks.B) Brokers try to profit from trading stocks but dealers earn commissions from trading stocks. C) Both brokers and dealers earn commissions from trading stocks.D) Both brokers and dealers try to profit from trading stocks.
Q:
Pinata Corporation acquired an 80% interest in Smackem Inc. for $130,000 on January 1, 2011, when Smackem had Capital Stock of $125,000 and Retained Earnings of $25,000. Assume the fair value and book value of Smackem's net assets were equal on January 1, 2011. Pinata's separate income statement and a consolidated income statement for Pinata and Subsidiary as of December 31, 2011, are shown below.
Pinata Consolidated
Sales revenue $145,850 $234,750
Income from Smackem 12,600
Cost of sales (60,000) (100,000)
Other expenses (20,000) (50,000)
Noncontrolling
interest share (3,150)
Net income $ 78,450 $ 81,600
Smackem's separate income statement must have reported net income of
A) $13,750.
B) $14,750.
C) $15,750.
D) $15,250.
Q:
A $130 credit to Office Equipment was credited to Fees Earned by mistake. By what amounts are the accounts under- or overstated as a result of this error?
A.Office Equipment, understated $130; Fees Earned, overstated $130.
B.Office Equipment, understated $260; Fees Earned, overstated $130.
C.Office Equipment, overstated $130; Fees Earned, overstated $130.
D.Office Equipment, overstated $130; Fees Earned, understated $130.
E.Office Equipment, overstated $260; Fees Earned, understated $130.
Q:
Unlimited liability exists whenA) the profits of the firm are taxed once. B) a firm dissolves when the owner dies. C) a corporation exists.D) the personal assets of the owner of a firm can be seized to pay off the firmʹs debts.
Q:
Pomograte Corporation bought 75% of Sycamore Company's common stock, with a book value of $900,000, on January 2, 2011 for $750,000. The law firm of Dewey, Cheatam and Howe was paid $55,000 to facilitate the purchase. At what amount should Pomograte's Investment in Sycamore account be reported on January 2, 2011?
A) $675,000
B) $695,000
C) $750,000
D) $845,000
Q:
Of the following errors, which one by itself will cause the trial balance to be out of balance?
A.A $200 cash salary payment posted as a $200 debit to Cash and a $200 credit to Salaries Expense.
B.A $100 cash receipt from a customer in payment of his account posted as a $100 debit to Cash and a $10 credit to Accounts Receivable.
C.A $75 cash receipt from a customer in payment of his account posted as a $75 debit to Cash and a $75 credit to Cash.
D.A $50 cash purchase of office supplies posted as a $50 debit to Office Equipment and a $50 credit to Cash.
E.An $800 prepayment from a customer for services to be rendered in the future was posted as an $800 debit to Unearned Revenue and an $800 credit to Cash.
Q:
What is the marginal rate of substitution between two goods and how is it related to the indifference curve?
Q:
Pental Corporation bought 90% of Sedacor Company's common stock at its book value of $400,000 on January 1, 2011. During 2011, Sedacor reported net income of $130,000 and paid dividends of $40,000. At what amount should Pental's Investment in Sedacor account be reported on December 31, 2011?
A) $400,000
B) $481,000
C) $490,000
D) $530,000
Q:
If the Debit and Credit column totals of a trial balance are equal, then:
A.All transactions have been recorded correctly.
B.All entries from the journal have been posted to the ledger correctly.
C.All ledger account balances are correct.
D.The total debit entries and total credit entries are equal.
E.The balance sheet would be correct.
Q:
A rational individual will never consume a unit of a good if itsA) marginal utility is diminishing.B) marginal utility is less than average utility.C) marginal utility is increasing. D) marginal utility is negative.
Q:
Pardo Corporation paid $140,000 for a 70% interest in Spedeal Inc. on January 1, 2011, when Spedeal had Capital Stock of $50,000 and Retained Earnings of $100,000. Fair values of identifiable net assets were the same as recorded book values. During 2011, Spedeal had income of $40,000, declared dividends of $15,000, and paid $10,000 of dividends. On December 31, 2011, the consolidated financial statements will show
A) investment in Spedeal account of $170,000.
B) investment in Spedeal account of $165,000.
C) consolidated goodwill of $50,000.
D) consolidated dividends receivable of $5,000.
Q:
The credit purchase of a delivery truck for $4,700 was posted to Delivery Trucks as a $4,700 debit and to Accounts Payable as a $4,700 debit. What effect would this error have on the trial balance?
A.The total of the Debit column of the trial balance will exceed the total of the Credit column by $4,700.
B.The total of the Credit column of the trial balance will exceed the total of the Debit column by $4,700.
C.The total of the Debit column of the trial balance will exceed the total of the Credit column by $9,400.
D.The total of the Credit column of the trial balance will exceed the total of the Debit column by $9,400.
E.The total of the Debit column of the trial balance will equal the total of the Credit column.
Q:
If goods are completely unrelated, their cross price elasticity willA) be greater than one. B) be less than one. C) be equal to zero. D) be negative.
Q:
In the preparation of consolidated financial statements, which of the following intercompany transactions must be eliminated as part of the preparation of the consolidation working papers?
A) All revenues, expenses, gains, losses, receivables, and payables
B) All revenues, expenses, gains, and losses but not receivables and payables
C) Receivables and payables but not revenues, expenses, gains, and losses
D) Only sales revenue and cost of goods sold
Q:
The price elasticity of demand measuresA) the responsiveness of quantity demanded to a change in price.B) the responsiveness of price to a change in competition.C) the change in quantity demanded due to a change in price of a substitute good.D) the change in price due to a change in demand.
Q:
In which of the following situations would the trial balance not balance?
A.A $1,000 collection of an account receivable was erroneously posted as a debit to Accounts Receivable and a credit to Cash.
B.The purchase of office supplies on account for $3,250 was erroneously recorded in the journal as $2,350 debit to Office Supplies and credit to Accounts Payable.
C.A $50 cash receipt for the performance of a service was not recorded at all.
D.The purchase of office equipment for $1,200 was posted as a debit to Office Supplies and a credit to Cash for $1,200.
E.The cash payment of a $750 account payable was posted as a debit to Accounts Payable and a debit to Cash for $750.
Q:
Percy Inc. acquired 80% of the outstanding stock of Sillson Company in a business combination. The book values of Sillson's net assets are equal to the fair values except for the building, whose net book value and fair value are $500,000 and $800,000, respectively. At what amount is the building reported on the consolidated balance sheet?
A) $400,000
B) $500,000
C) $640,000
D) $800,000
Q:
A trial balance taken at year-end showed total credits exceed total debits by $4,950. This discrepancy could have been caused by:
A.An error in the general journal where a $4,950 increase in Accounts Receivable was recorded as an increase in Cash.
B.A net income of $4,950.
C.The balance of $49,500 in Accounts Payable being entered in the trial balance as $4,950.
D.The balance of $5,500 in the Office Equipment account being entered on the trial balance as a debit of $550.
E.An error in the general journal where a $4,950 increase in Accounts Payable was recorded as a decrease in Accounts Payable.
Q:
In the above figure, if a firm is cleaning up Q2 units of pollution, it is anA) efficient solution, because marginal social benefits are greater than marginal social costs. B) efficient solution, because marginal social benefits are equal to marginal social costs.C) inefficient solution, because marginal social benefits are greater than marginal social costs. D) inefficient solution, because marginal social costs are greater than marginal social benefits.
Q:
On July 1, 2011, when Salaby Company's total stockholders' equity was $360,000, Pogana Corporation purchased 14,000 shares of Salaby's common stock at $30 per share. Salaby had 20,000 shares of common stock outstanding both before and after the purchase by Pogana, and the book value of Salaby's net assets on July 1, 2011 was equal to the fair value. On a consolidated balance sheet prepared at July 1, 2011, goodwill would be
A) $60,000.
B) $85,714.
C) $100,000.
D) $240,000.
Q:
In an attempt to reduce the poverty rate, there has recently been a movement away from income maintenance programs toA) Supplemental Security Income programs. B) reducing the age a person can retire at.C) encouraging people to get jobs.D) incorporating the Lorenz policy in decisions.
Q:
A $15 credit to Sales was posted as a $150 credit. By what amount is Sales in error?
A.$150 understated.
B.$135 overstated.
C.$150 overstated.
D.$15 understated.
E.$135 understated.
Q:
On January 1, 2012, Packaging International purchased 90% of Shipaway Corporation's outstanding shares for $135,000 when the fair value of Shipaway's net assets were equal to the book values. The balance sheets of Packaging and Shipaway Corporations at year-end 2011 are summarized as follows:
Packaging Shipaway
Assets $590,000 $180,000
Liabilities $70,000 $30,000
Capital stock 360,000 90,000
Retained earnings 160,000 60,000
If a consolidated balance sheet was prepared immediately after the business combination, the noncontrolling interest would be
A) $9,000.
B) $13,500.
C) $15,000.
D) $16,667.
Q:
While in the process of posting from the journal to the ledger a company failed to post a $50 debit to the Office Supplies account. The effect of this error will be that:
A.The Office Supplies account balance will be overstated.
B.The trial balance will not balance.
C.The error will overstate the debits listed in the journal.
D.The total debits in the trial balance will be larger than the total credits.
E.All of these effects will be caused by the error.
Q:
The labor market in professional baseball is an example ofA) a bilateral monopoly. B) a monopsonistic labor market.C) a monopolistic labor market. D) a perfectly competitive labor market.
Q:
The unamortized excess account is
A) a contra-equity account.
B) used in allocating the amounts paid for recorded balance sheet accounts that are above or below their fair values.
C) used in allocating the amounts paid for each asset and liability that are above or below their book values, especially when numerous assets or liabilities are involved.
D) the excess purchase cost that is attributable to goodwill.
Q:
Which of the following statements is true?
A.If the trial balance is in balance, it proves that no errors have been made in recording and posting transactions.
B.The trial balance is a book of original entry.
C.Another name for the trial balance is the chart of accounts.
D.The trial balance is a list of all accounts from the ledger with their balances at a point in time.
E.The trial balance is another name for the balance sheet as long as debits balance with credits.
Q:
Deregulation has contributed toA) an increase in union membership. B) declines in union membership.C) higher wages in unions. D) an increase in union power.
Q:
A newly acquired subsidiary had pre-existing goodwill on its books. The parent company's consolidated balance sheet will
A) not show any value for the subsidiary's pre-existing goodwill.
B) treat the goodwill similarly to other intangible assets of the acquired company.
C) not show any value for the pre-existing goodwill unless all other assets of the subsidiary are stated at their full fair value.
D) always show the pre-existing goodwill of the subsidiary at its book value.
Q:
A report that lists accounts and their balances, in which the total debit balances should equal the total credit balances, is called a(n):
A.Account balance.
B.Trial balance.
C.Ledger.
D.Chart of accounts.
E.General Journal.
Q:
Suppose that in a computer factory, if there is 1 worker, 80 computers are produced per week.If there are 2 workers, 150 computers are produced per week. If there are 3 workers, 210 computers are produced per week. Given this information, thereA) is diminishing marginal product. B) are too many workers.C) are not enough workers. D) is increasing marginal product.
Q:
Perth Corporation acquired a 100% interest in Sansone Company for $1,600,000 when Sansone had no liabilities. The book values and fair values of Sansone's assets were
Book Value Fair Value
Current assets $350,000 $400,000
Equipment 150,000 210,000
Land & buildings 570,000 590,000
Total assets $1,070,000 $1,200,000
Immediately following the acquisition, equipment will be included on the consolidated balance sheet at
A) $150,000.
B) $200,000.
C) $210,000.
D) $280,000.
Q:
An accountant has debited an account for $3,500 and credited a liability account for $2,000. Which of the following would be an incorrect way to complete the recording of this transaction:
A.Credit another asset account for $1,500.
B.Credit another liability account for $1,500.
C.Credit an expense account for $1,500.
D.Credit the owner's capital account for $1,500.
E.Debit another asset account for $1,500.
Q:
The total cost of federal regulation includesA) the funding of government agencies overseeing compliance, the compliance cost for the regulated firms, and the opportunity cost of regulation for the firms.B) the funding of government agencies overseeing compliance less the compliance cost for the regulated firms and the opportunity cost of regulation for the firms.C) only the cost of compliance by the regulated firms.D) only the funding of the regulatory agencies.
Q:
On June 1, 2011, Puell Company acquired 100% of the stock of Sorrell Inc. On this date, Puell had Retained Earnings of $100,000 and Sorrell had Retained Earnings of $50,000. On December 31, 2011, Puell had Retained Earnings of $120,000 and Sorrell had Retained Earnings of $60,000. The amount of Retained Earnings that appeared in the December 31, 2011 consolidated balance sheet was
A) $120,000.
B) $130,000.
C) $170,000.
D) $180,000.
Q:
By reducing the product compatibility of iPod, Apple can lower the price elasticities of demand forA) Apple products that are complementary to the iPod. B) Apple products that are substitutable to the iPod.C) products by other firms that have a positive network effects. D) products that are not related to the iPod.
Q:
A company had the following accounts and balances year-end: If all of the accounts have normal balances, what are the totals for the trial balance?
A.$ 45,200.
B.$ 67,000.
C.$104,800.
D.$209,600.
E.$186,600.
Q:
Subsequent to an acquisition, the parent company and consolidated financial statement amounts would not be the same for
A) investments in unconsolidated subsidiaries.
B) investments in consolidated subsidiaries.
C) capital stock.
D) ending retained earnings.
Q:
A record in which the effects of transactions are first recorded and from which transaction amounts are posted to the ledger is a(n):
A.Account.
B.Trial balance.
C.Journal.
D.T-account.
E.Balance column account.
Q:
In an oligopolistic market, each firmA) has a constant marginal cost.B) faces a perfectly elastic demand function.C) must consider the reaction of rival firms when making a pricing or output decision. D) produces at minimum average cost in the long run.
Q:
Pregler Inc. has 70% ownership of Sach Company, but should exclude Sach from its consolidated financial statements if
A) Sach is in a regulated industry.
B) Pregler uses the equity method for Sach.
C) Sach is in legal reorganization.
D) Sach is in a foreign country and records its books in a foreign currency.
Q:
A general journal is:
A.A ledger in which amounts are posted from a balance column account.
B.Not required if T-accounts are used.
C.A complete record of any transaction and the place from which transaction amounts are posted to the ledger accounts.
D.Not necessary in electronic accounting systems.
E.A book of final entry because financial statements are prepared from it.
Q:
A monopolistic competitor would face a demand curve with aA) positive slope. B) negative slope.C) constant slope. D) slope equal to 0.
Q:
A subsidiary can be excluded from consolidation if
A) control does not rest with the majority owner.
B) the subsidiary is in legal reorganization.
C) the subsidiary is operating under severe foreign-exchange restrictions.
D) All of the above are correct.
Q:
A balance column ledger account is:
A.An account entered on the balance sheet.
B.An account with debit and credit columns for posting entries and another column for showing the balance of the account after each entry is posted.
C.Another name for the withdrawals account.
D.An account used to record the transfers of assets from a business to its owner.
E.A simple form of account that is widely used in accounting to illustrate the debits and credits required in recording a transaction.
Q:
PQTC$1310$15$1214$25$1119$45$1025$75$930$115$835$165Refer to the above table. Given the demand and cost schedules, what are the maximum economic profits for this monopolist?A) $155 B) $143 C) $175 D) $164
Q:
Panini Corporation owns 85% of the outstanding voting stock of Strathmore Company and Malone Corporation owns the remaining 15% of Strathmore's voting stock. On the consolidated financial statements of Panini Corporation and Strathmore, Malone is
A) an affiliate.
B) a noncontrolling interest.
C) an equity investee.
D) a related party.
Q:
When a perfectly competitive firm experiences zero economic profits, A) the high barriers to entry prevent further competition.B) existing firms exit the industry.C) additional firms enter the industry.D) firms have no incentive to exit or enter the industry.
Q:
From the standpoint of accounting theory, which of the following statements is the best justification for the preparation of consolidated financial statements?
A) In substance the companies are separate, but in form the companies are one entity.
B) In substance the companies are one entity, but in form they are separate.
C) In substance and form the companies are one entity.
D) In substance and form the companies are separate entities.
Q:
The general journal provides a place for recording:
A.The transaction date.
B.The names of the accounts involved.
C.The amount of each debit and credit.
D.An explanation of the transaction.
E.All of these.
Q:
What method must be used if FASB Statement No. 94 prohibits full consolidation of a 70% owned subsidiary?
A) The cost method
B) The Liquidation value
C) Market value
D) Equity method
Q:
The record in which transactions are first recorded is the:
A.Account balance.
B.Ledger.
C.Journal.
D.Trial balance.
E.Cash account.
Q:
Which is always true at a firmʹs profit -maximizing rate of production?A) Total Revenue = Total CostsB) The total revenue curve lies below the total cost curve.C) Marginal Revenue > Marginal CostD) Marginal Revenue = Marginal Cost
Q:
A column in journals and ledger accounts used to cross reference journal and ledger entries is the:
A.Account balance column.
B.Debit column.
C.Posting reference column.
D.Credit column.
E.Description column.
Q:
Marginal cost is equal to average variable costA) when average variable cost is at its minimum value.B) when marginal cost is at its minimum value. C) when average variable cost is getting smaller. D) when average variable cost is getting larger.
Q:
Keynse Company owns 70% of Subdia Incorporated. The Investment in Subdia qualifies as a business reporting unit under FASB 142, and Keynse has reported goodwill in the amount of $200,000 with respect to its acquisition of Subdia. Subdia's $10 par common stock is currently trading for $92 per share, Subdia's account book balances and related fair values at December 31, 2011 are shown below.
Book Values Fair Values
Cash $2,000,000 $2,000,000
Accounts Receivable 8,000,000 7,500,000
Plant assets net 18,000,000 23,000,000
Patents 1,000,000 1,500,000
Accounts Payable ( 9,000,000) ( 9,000,000)
Notes Payable (16,000,000) (16,000,000)
Common Stock ( 1,000,000)
Retained Earnings ( 3,000,000)
Required: Determine if Goodwill has been impaired, and if so, the amount of adjustment that would be required.
Q:
The process of transferring general journal information to the ledger is:
A.Double-entry accounting.
B.Posting.
C.Balancing an account.
D.Journalizing.
E.Not required unless debits do not equal credits.
Q:
The theory that there is no way to ʺget rich quickʺ in securities due to a lack of predictable trends isA) no-win theory. B) market trend analysis. C) random walk theory. D) trading.
Q:
On January 1, 2010, Palgan, Co. purchased 75% of the outstanding voting common stock of Somil, Inc., for $1,500,000. The book value of Somil's net equity on that date was $2,000,000. Book values were equal to fair values except as follows:
Book Fair
Assets & Liabilities Values Values
Inventory $ 225,000 $ 253,000
Building 850,000 750,000
Note payable 320,000 304,000
Required:
Prepare a schedule to allocate any excess purchase cost to specific assets and liabilities.
Q:
Which of the following is not a disadvantage of a proprietorship?
A) How profits are taxed
B) Ability to raise capital
C) Unlimited liability
D) The disposition of the firm when the owner dies
Q:
At the beginning of the current year, Taunton Company's total assets were $248,000 and its total liabilities were $175,000. During the year, the company reported total revenues of $93,000, total expenses of $76,000 and owner withdrawals of $5,000. There were no other changes in owner's capital during the year and total assets at the end of the year were $260,000. Taunton Company's debt ratio at the end of the current year is:
A.70.6%.
B.67.3%.
C.32.7%.
D.48.6%.
E.Cannot be determined from the information provided.
Q:
On January 1, 2010, Petrel, Inc. purchased 70% of the outstanding voting common stock of Ocean, Inc., for $2,600,000. The book value of Ocean's net equity on that date was $3,100,000. Book values were equal to fair values except as follows:
Book Fair
Assets & Liabilities Values Values
Equipment $ 250,000 $ 190,000
Building 600,000 700,000
Note payable 270,000 240,000
Required:
Prepare a schedule to allocate any excess purchase cost to specific assets and liabilities.
Q:
At the end of the current year, Norman Company reported total liabilities of $300,000 and total equity of $100,000. The company's debt ratio on the last year-end was:
A.300%.
B.33.3%
C.75.0%.
D.$400,000.
E.Cannot be determined from the information provided.
Q:
Mathematically the marginal rate of substitution isA) always a negative number. B) always a positive number. C) is equal to 1.D) sometimes a positive and sometimes a negative number.
Q:
For 2010, 2011, and 2012, Squid Corporation earned net incomes of $40,000, $70,000, and $100,000, respectively, and paid dividends of $24,000, $32,000, and $44,000, respectively. On January 1, 2010, Squid had $500,000 of $10 par value common stock outstanding and $100,000 of retained earnings.
On January 1 of each of these years, Albatross Corporation bought 5% of the outstanding common stock of Squid paying $37,000 per 5% block on January 1, 2010, 2011, and 2012. All payments made by Albatross in excess of book value were attributable to equipment, which is depreciated over five years on a straight-line basis.
Required:
1. Assuming that Albatross uses the cost method of accounting for its investment in Squid, how much dividend income will Albatross recognize for each of the three years and what will be the balance in the investment account at the end of each year?
2. Assuming that Albatross has significant influence and uses the equity method of accounting (even though its ownership percentage is less than 20%), how much net investee income will Albatross recognize for each of the three years?
Q:
Which of the following statements describing the debt ratio is false?
A.It is of use to both internal and external users of accounting information.
B.A relatively high ratio is always desirable.
C.The dividing line for a high and low ratio varies from industry to industry.
D.Many factors such as a company's age, stability, profitability and cash flow influence the determination of what would be interpreted as a high versus a low ratio.
E.The ratio might be used to help determine if a company is capable of increasing its income by obtaining further debt.
Q:
Regretting a last unit of consumption of cake implies thatA) the total utility from eating cake was negative. B) cake is an inferior good.C) the marginal utility of the last unit of cake consumed was negative. D) the demand curve for cake is horizontal.
Q:
For 2010 and 2011, Sabil Corporation earned net income of $480,000 and $640,000 and paid dividends of $18,000 and $20,000, respectively. At January 1, 2010, Sabil had $200,000 of $10 par value common stock outstanding and $1,500,000 of retained earnings.
On January 1 of each of these years, Phyit Corporation bought 10% of the outstanding common stock of Sabil paying $200,000 per 10% block on January 1, 2010 and 2011. All payments made by Phyit in excess of book value were attributable to equipment, which is depreciated over ten years on a straight-line basis.
Required:
1. If Phyit uses the cost method of accounting for its investment in Sabil, how much dividend income will Phyit recognize in 2010 and 2011, and what will be the balance in the investment account at the end of each year?
2. If Phyit has significant influence and can justify using the equity method of accounting, how much net investee income will Phyit recognize for 2010 and 2011?
Q:
Stride Rite has total assets of $385 million. Its total liabilities are $100 million and its equity is $285 million. Calculate its debt ratio.
A.35.1%.
B.26.0%.
C.38.5%.
D.28.5%.
E.58.8%.
Q:
Shoreline Corporation had $3,000,000 of $10 par value common stock outstanding on January 1, 2009, and retained earnings of $1,000,000 on the same date. During 2009, 2010, and 2011, Shoreline earned net incomes of $400,000, $700,000, and $300,000, respectively, and paid dividends of $300,000, $550,000, and $100,000, respectively.
On January 1, 2009, Pebble purchased 21% of Shoreline's outstanding common stock for $1,240,000. On January 1, 2010, Pebble purchased 9% of Shoreline's outstanding stock for $510,000, and on January 1, 2011, Pebble purchased another 5% of Shoreline's outstanding stock for $320,000. All payments made by Pebble that are in excess of the appropriate book values were attributed to equipment, with each block depreciable over 20 years under the straight-line method.
Required:
1. What is the adjustment to Investment Income for depreciation expense for Pebble's investment in Shoreline in 2009, 2010, and 2011?
2. What will be the December 31, 2011 balance in the Investment in Shoreline account after all adjustments have been made?