1) Harter Inv bought 2,000 shares of Lee Co. common stock on Jan 1, Yr 4 for $10
ID: 2371306 • Letter: 1
Question
1) Harter Inv bought 2,000 shares of Lee Co. common stock on Jan 1, Yr 4 for $10,000 and 2,000 shares Olivia CO. common stock on Jul 1, Yr 4 for $12,000. At end of yr 4, the market value of Lee stock was $14,000 and market value of Olivia stock was $15,000. The stocks we held for long-term investment potential. Harter owns 8% of Lee and 12% of Olivia. The Yr end market to market adjustment made by Harter should include:a. A debit to an income account for an unrealized holding loss
b. A debit to an equity account for an unrealized holding loss
c. A debit to an income account for an unrealized holding gain
d. A debit to an equity account for an unrealized holding gain
Questions 2 - 3 based on following: On Jan 1, Yr 7, Daniel Co. purchased 35% of the outstanding common stock of the Matt Co. for $17,500 when the net assets of Matt were $50,000. During Yr 7, Matt Co. earned $20,000 and declared a dividend of $10,000 for the Yr. (Reminder: The net assets of a company == assets minus liabilities; therefore, net assets also equal owners equity. Assets = Liabilities + Owners Equity. Assets - Liabilities = Owners Equity)
2) The entry to recognize (record) Daniels share of Matt earnings for the Yr would be?
a. DR Cash 7,000; CR Investment income 7,000
b. DR Investment in Matt Co. 7,000; CR Investment income 7,000
c. DR Dividend receivable 7,000; CR Cash 7,000
d. DR Investment income 7,000; CR Investment in Matt Co. 7,000
3) The entry made by Daniel to record Matt dividend declaration on Daniels books would be?
a. DR Dividends receivable 3,500; CR Cash 3,500
b. DR Dividends receivable 3,500; CR Dividend income 3,500
c. DR Dividends receivable 3,500; CR investment in Matt Co.. 3,500
D. DR Cash 3,500; CR Dividend income 3,500
4) For consolidation purposes, goodwill is:
a. reported under the pooling on interests method only
b. Reported under the purchase method only
c. Reported under the pooling of interests method and the purchase method
d. Never reported in a consolidation
5) Foreign currency monetary assets and liabilities are translated using the _____ rate of exchange as of the balance sheet date.
a. Current b. Historic c. Present value d. Temporal
6) A major difference between accounting for postretirement benefit plans and pension plans is that:
a. Postretirement benefit plans are not required to be funded
b. Postretirement benefit plans do not need to show a liability for accumulated postretirement benefit obligation on the plan sponsor balance sheet
c. Postretirement benefit plans do not deduct the return of plan assets when funded
d. There is no accumulated postretirement benefit plan
Explanation / Answer
1.d. A debit to an equity account for an unrealized holding gain 2 a. DR Cash 7,000; CR Investment income 7,000 3 c. DR Dividends receivable 3,500; CR investment in Matt Co.. 3,500 4 b. Reported under the purchase method only 5 a. Current 6 c. Postretirement benefit plans do not deduct the return of plan assets when funded
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