10. Nancy Drew Creprey owns 30%! wn, 30% interest (Equity Milhod) in the strek o

Question

10. Nancy Drew Creprey owns 30%! wn, 30% interest (Equity Milhod) in the strek of haley es poration. Durisg the year, Finley pays $2s,te in dlividends, drs s1eiars i A) $25,000 C) $24,oo0 D) $22.500 11 . If 10% or the common stock of long-term is pirehased as ppropriate incthod of accounting for the lwvestment ba investment, the imense compony A) the Cost method. B) the Equity method. preparation of Consolidated Financial Statemcnts D) determined by agreeme m with whomever owns the remaining 90% of the si 12. On January 1, 2011, Bartley Corp. paid $800,000 for 100,009 shares of Oak Compamy' conarnon stock, which represents 40% of Oak's outstanding common stock. Ok tep net net ineome of $200,000 and paid cash dividends of s60,000 during 2011 Bartiey should report the total Net Book Investment in Oak Company on its Decemher 3 i ,2011, balaace sheet at: (Equity Method) A) $800,000 B) $744,000 C) $824,000 D) 5856,000 S70,000 (EI) at the beginning (BI) and end (El) of the year, respectively. Net income (NI) reported on the income statement for the year was $280,000. Exclusive of the effect of other adjustments, the cash flows from operating activities to be reported on the statement of cash flows is (Cash Flow OPS) A) $280,000. B) $290,000. C) $350,000. D) $270,000. 13. Accounts receivable (A/R) arising from sales to customers amounted to Ss0,000 (BI) and Page 3

Explanation / Answer

10)correct option is "d"-22500

Investment increase by [net income-dividend]*%of holding

             =[100000-25000]*.30

            = $22500

11)correct option is"A"-cost method

since the holding is only 10% cost method is appropriate.

12)increase in investment : [200000-60000]*.40= 56000.

investment value at 31december2011 =800000+56000= $856000

correct option is "D"

13)correct option is "B"-290000

decrease in accounts receivable :80000-70000=10000

cash flow from operating activity =280000+10000=290000

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