10. Corporation. During the year. Fir net ineeans. Nance Conpny\'nvests Nancy Dr

Question

10. Corporation. During the year. Fir net ineeans. Nance Conpny'nvests Nancy Drew Compesny owns 30% li·terest (Equity Method) "sestark artm in Fielcy will lacreane ly C) $24,000 D) $22,500 11. If10% or the common stock of an invesee companykyirchmed oskag tern nvestment, the appropeiate methed ot accounting for the nwenmem w A) B) C) D) the Cest method. the Equity method. the peeparation of Censolidated Financinl Statements detennined by agreement with whomever owns the remaning 9 0% of tho sock. 12. Ou Jamuary t, 2011, Bartley Corp, paid $800,000 for 100,000 shares of Oak Company's commot, stock, which represents 40% of 0 net income of 5200,000 and pald eash dividends of 560,000 duzing 2011. Bartbey shools report the total Net Book Investment in Oak Company on its Decenmber 31,2011, boinee sheet at: (Equity Method) A) $800,000 B) $744,000 C) $824,000 D) $856,000 ak's outst anding common stock. Oak sepuried 13. Accounts receivable (A/R) arising from sales to customers amoumted to $80,000 (B1)ad 70,000 (EI) at the beginning (BI) and end of the year, tespectively Net income (NI reported on the income statement for the year was 5280,000. Exclusive of the effect of other adjustments, the eash flows from operating setivities to be reported on the statermeni of cash flows is (Cash Flow- OPS) A) $280,000. B) $290,000. C) $350,000 D) $270,000. Page 3

Explanation / Answer

10) Nancy company investment will increase by:- $.30000 , since the company owns 30% interest in the company.

11) The appropriate method for the investment is:- by the preparation of Consolidated financial statements.

12) The balance of Net book investment as on 31st December 2011 is $ 824000

13) The cash flow from operating activity to be reported in the statement of cash flows shall be $ 270000, since decrease in current assets is deducted from the cash flows.

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