11. Which statement is true regarding the unrealized gain (or loss) on available
ID: 2582383 • Letter: 1
Question
11. Which statement is true regarding the unrealized gain (or loss) on available-for-sale securities? A) It is reported on the income statement as part of operating income. B) It is considered to be part of other comprehensive income. C) It is accounted for the same as an unrealized gain or loss from trading securities. D) It results from the sale of available-for-sale securities. 12. Willard Co. acquired a 30% interest in Diltronies for S420.000 and appropriately applied the equity method. During the first year, Diltronics reported net income of $250,000 and paid cash dividends totaling $50,000. What amount will Willard report as it relates to the investment at the end of the first year o its income statement? A) Investment earnings totaling $75,000 B) Investment earnings totaling $45,000 C) Net investment earnings totaling $150,000 D) Receipt of dividends totaling $15,000 13. Why might a manager intentionally classify a trading scurity as an available-for-sale security? A) The manager may wish to prevent a decline in value from being reported on the income B) The manager may wish to prevent a decline in value from being reported on the balance C) The manager may wish to prevent a decline in value from being reported in shareholders D) The manager may wish to prevent an increase in value from being reported in shareholders 14. Blue Co. received dividends from its common stock investments during the year ended statement. sheet equity. equity December 31 as follows: . A cash dividend totaling $25,000 from its trading security investment in . A cash dividend of $10,000 from Oliver Corp. in which Blue Co. owns Keyser Corporation, when the market price of Keyser's shares was $20 per share a 32% interest How much dividend income should Blue report in its income statement? A) $25,000 B) $15,000 C) $10,000 D) S-0-Explanation / Answer
11) Option [B] 12) Option [A] Cash dividend is shown as a deduction from investment value. 14) Option [A] Decline in value of trading securities is reported in the income statement, whereas, in the case of available for sale securities it will be reported under other comprehensive income. 15) Option [A] Only dividend from trading security is included in income. The dividend from Oliver Corp, would be reduced from investment value under the equity method. As the investment is more than 20%, the equity method would be used.
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