答案和详解如下： Q30. Compton Corporation purchased 10% of the outstanding shares of Harter Co. on January 1 and plans to hold these securities for short-term trading purposes. Harter shares trade on the New York Stock Exchange. Based on this information, Compton
Corp. would use which of the following methods to account for its investment in Harter? A) Cost method. B) Equity method. C) Market method. Correct answer is C) The 10% ownership stake indicates that the cost or market method should be used. Since Harter shares trade on the NYSE we know there is a public market for them and their fair value can be readily estimated. The cost method is required if there is no public market or the value cannot be readily estimated. Since Compton Corp. is using these securities for short term trading they would be classified as trading securities under SFAS 115. The market method is used for securities classified as trading securities. Q31. Harter Company recently acquired a 40% stake in Compton Corp. for $40 million in cash by borrowing at 10%. Harter will account for this acquisition using which of the following methods:
A) Equity method. B) Consolidation. C) Held to maturity debt securities method. Correct answer is A) The 40% ownership stake would indicate significant control has been gained over the affiliate company. The equity method would be used. Q32. Sawbuck Corporation recently acquired a 60% stake in Rawboard Inc. for $70 million in newly issued common stock. Given this information, which of the following methods should be used to account for the acquisition of Rawboard?
A) Consolidation. B) The purchase method. C) Proportionate consolidation. Correct answer is A) When the parent company has at least a 50% ownership stake and control over the subsidiary, the consolidation method is used. Q33. Which of the following statements is least accurate regarding the accounting for business combinations according to U.S.
Generally Accepted Accounting Principles (GAAP)? A) In the case of the consolidation of two companies, the revenues and expenses of both companies are added together, with any inter-company transfers removed and reported on the parent's income statement. B) Using the equity method of accounting for an investment in another company, the income to the parent company will consist of dividends, interest, and capital gains from its investment in the other company. C) Using the equity method, the parent's proportionate share of the affiliate's income is included in the income of the parent. Correct answer is B) This is the description of the cost method. Q34. Company X owns 15% of company S and exerts significant control over the operations of the company. The book value of the investment on December 31, 2001, is $48,000. In 2002, company S earned $100,000 and paid dividends of $20,000. The impact of the investment on the income statement of company X is:
A) $15,000. B) $3,000. C) $12,000. Correct answer is A) Because company X exerts significant control over company S, the investment will be treated using the equity method, even though the ownership is less than the 20% guideline. The impact on the income statement is the proportionate income of company S, which is 0.15 × 100,000 = 15,000. | 
发表于 2009-1-7 15:48
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