1) Lazarus Consulting Services has 100,000 authorized shares of $4 par common st
ID: 2497832 • Letter: 1
Question
1) Lazarus Consulting Services has 100,000 authorized shares of $4 par common stock issued 40,000 shares at $8. Subsequently, Lazarus declared a 2% stock dividend on a date when the market price was $11 a share. What is the amount transferred from the retained earnings account to paid-in capital accounts as a result of the stock dividend?
a.
$3,200
b.
$6,400
c.
$4,800
d.
$8,800
2) Ignatius the Investor’s Income for the period would not be affected by
a.
interest received on a temporary investment in bonds
b.
dividends received on a long-term investment in stock where the investor owns 10% of the investee's stock
c.
dividends received on a long-term investment in stock where the investor owns 30% of the investee's stock
d.
interest received on a long-term investment in bonds
3) Phan Company owns 28% of the common stock of San Company and accounts for the investment using the equity method. Assuming that Phan Company purchased the stock several years ago, the balance in the investment account would be equal to the cost of the
a.
investment
b.
investment plus Phan's share of San’s net income earned since the investment was purchased
c.
investment plus the total amount of dividends Phan has received from San since the investment was purchased
d.
investment plus Phan’s share of San’s net income earned since the investment was purchased minus the total amount of dividends Phan has received from San since the investment was purchased
4) The Krebhel Company issued $100,000 of 12% bonds on May 1, 2006 at face value. The bonds pay interest semiannually on January 1 and July 1. The bonds are dated January 1, 2006, and mature on January 1, 2010. The total interest expense related to these bonds for the year ended December 31, 2006 is
a.
$2,000
b.
$4,000
c.
$8,000
d.
12,000
a.
$3,200
b.
$6,400
c.
$4,800
d.
$8,800
Explanation / Answer
1)correct option is "D" - 8800
[Number of shares as dividend = 40000 *2% = 800
Paid in capital = 11 *800 = 8800]
2)correct option is "C" -dividends received on a long-term investment in stock where the investor owns 30% of the investee's stock
Because it is a accounting for associate and we use equity method of investment accounting where dividend received is adjusted in investment account
3)correct option is "D" -nvestment plus Phan’s share of San’s net income earned since the investment was purchased minus the total amount of dividends Phan has received from San since the investment was purchased
4)correct option is "C" -8000
[interest = 100000 *.12 *8/12]
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