10) When using the equity method to account fo investor from the investee should

Question

10) When using the equity method to account fo investor from the investee should be recorded: r an i A) As a reduction in the investment account. B) As an increase in the investment account. C) As dividend income. D) As a contra item to stockholders' equity. 11) When the equity method of accounting for investments is used by the investor, the investment account is increased when: A) A cash dividend is received from the investee. B) The investee reports net income for the year. C) The investor records additional depreciation related to the investment. D) The investee reports a net loss for the year 12) Which of the following is not a liability? A) An unused line of credit. B) Estimated income taxes. C) Sales tax collected from customers. D) Advances from customers. 13) Current liabilities normally are recorded at their: A) Present value. B) Cost. C) Maturity amount. D) Expected value. 14) The rate of interest that actually is incurred on a note payable is called the: A) Face rate. B) Contract rate. C) Effective rate. D) Stated rate. 15) Jane's Donut Co. borrowed $200,000 on January 1, 2018, and signed a two-year note bearing interest at 12%. Interest is payable in full at maturity on January 1, 2020. In connection with this note, Jane's should report interest expense at December 31, 2018, in the amount of: A) $O B) $24,000. C) $48,000. D) $50,880. 16) Which of the following is not a current liability? A) Accounts payable. B) A note payable due in two years. C) Accrued interest payable D) Sales tax payable.

Explanation / Answer

10 - (A) As a reduction in the investment account

11 - (A) A Cash dividend is received from the investee.

12 - (A) A unused line of credit

13 - (C) Maturity Value

14 - (C) Effective rate

15 - (B) $200,000 x 12% = $24,000

16 - (B) A note payable due in two years

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