63 which of the following statements regarding the accounting for a common stock inv 4314008

63.Which of the following statements regarding the accounting for a common stock investment using the equity method is incorrect? 

A. The equity method is used for investments of ownership between 20% and 50% of the outstanding voting stock when the investor has the ability to exert significant influence.

B. The investment account is increased by the proportionate share of affiliate net income.

C. The investment account is decreased by the proportionate share of affiliate dividends.

D. Investment income equals the proportionate share of affiliate dividends.

64.Significant influence over the operating and financial policies of another company would not be indicated by: 

A. Participation on its board of directors.

B. Participation in its policy-making process.

C. Evidence of material transactions between the two companies.

D. Both firms using the services of the same law firms and investment advisors.

65.Gilman Company purchased 100,000 of the 250,000 shares of common stock of Burke Corporation on January 1, 2016, at $40 per share as a long-term investment. The records of Burke Corporation showed the following on December 31, 2016:

2016 net income$575,000

Dividends declared and paid during December, 2016$30,000

Market price per share$42

At what amount should Gilman Company report the Burke investment on the December 31, 2016 balance sheet? 

A. $4,218,000.

B. $4,000,000.

C. $4,124,000.

D. $3,800,000.

66.Gilman Company purchased 100,000 of the 250,000 shares of common stock of Burke Corporation on January 1, 2016, at $40 per share as a long-term investment. The records of Burke Corporation showed the following on December 31, 2016:

2016 net income$575,000

Dividends declared and paid during December, 2016$30,000

Market price per share$42

How much should Gilman Company report as investment income from the Burke investment during 2016? 

A. $230,000.

B. $218,000.

C. $12,000.

D. $30,000.

67.JDR Company purchased 40% of the common stock of YRK Corporation on January 1, 2016, for $2,000,000 as a long-term investment. The records of YRK Corporation showed the following on December 31, 2016:

2016 net income$290,000

At what amount should JDR report the YRK investment on the December 31, 2016 balance sheet? 

A. $2,116,000.

B. $2,000,000.

C. $2,096,000.

D. $2,108,000.

68.Copper Company purchased 40% of the common stock of York Corporation on January 1, 2016, for $2,000,000 as a long-term investment. The records of York Corporation showed the following on December 31, 2016:

2016 net income$290,000

How much investment income should Copper report from the York investment during 2016? 

A. $290,000.

B. $108,000.

C. $116,000.

D. $8,000.

69.Heartfelt Company owns a 40% interest in the voting common stock of Candle Corporation, and Heartfelt accounts for the investment using the equity method. During 2016, Candle Corporation reported net income of $100,000 and declared and paid cash dividends of $10,000. The carrying value of the Candle investment was $500,000 on January 1, 2016.

How much investment income should Heartfelt report during 2016 from the Candle investment? 

A. $36,000.

B. $40,000.

C. $4,000.

D. $10,000.

70.Heartfelt Company owns a 40% interest in the voting common stock of Candle Corporation, and Heartfelt accounts for the investment using the equity method. During 2016, Candle Corporation reported net income of $100,000 and declared and paid cash dividends of $10,000. The carrying value of the Candle investment was $500,000 on January 1, 2016.

At what amount is the Candle investment reported on the December 31, 2016 balance sheet of Heartfelt Company? 

A. $496,000.

B. $500,000.

C. $536,000.

D. $540,000.

71.On January 1, 2016, Palmer, Inc. bought 40% of the outstanding shares of Arnold Corporation at a cost of $137,000. Palmer uses the equity method of accounting for this investment. During 2016, Arnold Corporation reported $30,000 of net income and paid a total of $10,000 in cash dividends. At the end of 2016, the shares had a fair value of $150,000.

At what amount should the Arnold investment be reported at on the December 31, 2016 balance sheet of Palmer, Inc.? 

A. $150,000.

B. $157,000.

C. $145,000.

D. $163,000.

72.On January 1, 2016, Palmer, Inc. bought 40% of the outstanding shares of Arnold Corporation at a cost of $137,000. Palmer uses the equity method of accounting for this investment. During 2016, Arnold Corporation reported $30,000 of net income and paid a total of $10,000 in cash dividends. At the end of 2016, the shares had a fair value of $150,000.

At the end of 2016, the shares had a fair value of $150,000. What is the amount of Equity in Affiliate Earnings for 2016?

A. $4,000.

B. $12,000.

C. $13,000.

D. $21,000.

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