When is the equity method used to account for long-term investments in stocks? a
ID: 2499291 • Letter: W
Question
When is the equity method used to account for long-term investments in stocks?
a)When the investment is between 20 - 50% of the voting stock, regardless of whether or not significant influence can be achieved.
When the investment is greater than 50% of the voting stock, regardless of whether or not significant influence can be achieved.
When the investment is greater than 50% of the voting stock and significant influence can be achieved.
d)When the investment is between 20 - 50% of the voting stock and significant influence can be achieved
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Trenton Company has provided the following information:
• Net income, $240,000;
• Preferred shares issued, 6,000;
• Average common shares issued, 24,000;
• Common cash dividends declared and paid, $30,000;
• Market price per share, $36
• Average treasury shares of common stock, 4,000.
What was Trenton's price earnings ratio?
3.0
5.1
3.4
4.5
The debt-to-equity ratio measures which of the following?
Liquidity
Solvency
Profitability
Market strength
a)When the investment is between 20 - 50% of the voting stock, regardless of whether or not significant influence can be achieved.
b)When the investment is greater than 50% of the voting stock, regardless of whether or not significant influence can be achieved.
c)When the investment is greater than 50% of the voting stock and significant influence can be achieved.
d)When the investment is between 20 - 50% of the voting stock and significant influence can be achieved
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Trenton Company has provided the following information:
• Net income, $240,000;
• Preferred shares issued, 6,000;
• Average common shares issued, 24,000;
• Common cash dividends declared and paid, $30,000;
• Market price per share, $36
• Average treasury shares of common stock, 4,000.
What was Trenton's price earnings ratio?
3.0
5.1
3.4
4.5
The debt-to-equity ratio measures which of the following?
Liquidity
Solvency
Profitability
Market strength
Explanation / Answer
Answer: d)When the investment is between 20 - 50% of the voting stock and significant influence can be achieved.
because The investment must be between 20 to 50% of the voting stock and significant influence must be achieved.
Answer:3.0
P/E ratio=MPS/EPS
Earnings per share ($12) = Net income ($240,000) ÷ Average number of common shares outstanding (24,000 - 4,000).
Price earnings ratio (3) = Market price per share ($36) ÷ Earnings per share ($12)
Answer: Solvency
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