Multiple Choice: You are given several words, phrases, or numbers to choose from
ID: 2589429 • Letter: M
Question
Multiple Choice:
You are given several words, phrases, or numbers to choose from in completing each of the following statements or in answering the following questions. In each case select the one that best completes the statement, or answers the question, and place the best answer in the space provided.
_______ 1. On January 1, 20X9, Allured Company purchased 12,000 shares of More Corporation's common stock at 601/4 plus a $6,000 commission. On July 1, 20X9, More Corporation declared and paid dividends of $0.85 per share, and on December 31, 20X9, it reported a net income of $156,000. Assuming More Corporation has 48,000 outstanding common shares and that the market value per share at December 31, 20X9, is $65, what is the carrying value of Alfred’s investment in More at December 31?
a. $729,000.
b. $757,800.
c. $751,800.
d. $723,000.
e. $780,000.
_______ 2. On January 1, 20X9, Allured Company purchased 12,000 shares of More Corporation's common stock at 601/4 plus a $6,000 commission. On July 1, 20X9, More Corporation declared and paid dividends of $0.85 per share, and on December 31, 20X9, it reported a net income of $156,000. Assuming More Corporation has 96,000 outstanding common shares and that the market value per share at December 31, 20X9, is $65, what is the carrying value of Allured’s investment in More at December 31?
a. $723,000.
b. $742,500.
c. $738,300.
d. $780,000.
e. $729,000.
Short problem:
On January 1, 2017, Large Company paid $90,000 for 36,000 of Small Company's 90,000 outstanding common shares. Small Company paid a dividend of $20,000 on November 1, 2017, and at the end of the year reported earnings of $40,000. The market value per share on December 31, 2017, was $2.10. On January 3, 2018, Large Company sold its interest in Small Company for $120,000.
1. Complete the following by filling in the blanks.
The ________ method should be used in Large Company's books to account for the investment in Small Company since an investor that owns ______ or more, but not more than ______, of a company’s voting stock is normally presumed to have a ____________ influence over the investor.
Explanation / Answer
1. option b. is correct
workings:
2.
ownership is less than 20% assumed cost method is used.
Market value is treated as closing balance under cost method.
Option d is correct
Short problem:
Method to be used is equity as ownership is more than 20% but less than 50% of a company's voting stock is notmally presumed to have a singificant influence over the investor.
Shares purchased 12,000 Share price 60.25 Share cost 7,23,000 Add: Commission 6,000 Total cost 7,29,000Related Questions
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