Reading 21- LOS B ～ Q6－10 Delta, style, market, business

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6.During 2002, Delta rebuilt all of its U.S. operations and restored all of its sales and business and recorded a profitable year. Its stock resumed trading, and it quickly ended the year at a market value of $10 per share. At the end of the 2002, Pamelan would:

A)  write up the value of its investment by $5 per share to $10 per share to reflect its current market value.

B)  write up the value of its investment by $2 per share to $7 per share to reflect the correct carrying value of its investment.

C)  not be permitted to write up the carrying value of its investment.

D)  write up the value of its investment by $3 per share to $8 per share to reflect the correct carrying value of its investment.

 

7.On January 15, 2003, Pamelan sold all of its shares in Delta at a price of $11 for a gain of:

A)  $1 per share.

B)  $4 per share.

C)  $3 per share.

D)  $6 per share.

 

8.The Anderson Company acquired 100,000 shares of the Birschbach Company on January 1, 2000, at $25 per share. The market price of a share of Birschbach stock on December 31, 2000, was $35 per share. During 2000, Birschbach paid dividends of $1.50 per share and had earnings of $2.50 per share.

If Anderson Company accounts for the Birschbach Company shares using the equity method, the carrying amount of these shares on Anderson's balance sheet at the end of 2000 is:

A)  $2.5 million.

B)  $2.75 million.

C)  $3.5 million.

D)  $2.6 million.

9.For the year 2000, the investment income that Anderson Company reports on its investment in Birschbach Company shares, assuming it accounts for the shares as an available-for-sale investment, is:

A)  $100,000.

B)  $200,000.

C)  $150,000.

D)  $250,000.

 

10.Fiduciary Investors held two portfolios for marketable equity securities:

§   $50 million in Portfolio A was accounted for as available for sale. 

§   $50 million in Portfolio B was accounted for as trading securities.

Assume that Fiduciary transferred $10 million in trading securities from Portfolio B into Portfolio A. It was determined that subsequent to the transfer these securities had a market value of $8 million. If no previous write downs were made, Fiduciary must:

A)  do nothing to its income statement or equity section of its balance sheet.

B)  charge $2 million to its income statement.

C)  charge $2 million to the equity section of its balance sheet only if impaired permanently.

D)  charge $2 million to the equity section of its balance sheet.