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.
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.
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.
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.
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.
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发表于 2009-1-7 15:48
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