11 marketable securities that the investor company does not intend to sell in the ne 4307855

11 marketable securities that the investor company does not intend to sell in the ne 4307855

11) Marketable securities that the investor company does not intend to sell in the near future are called ________.

A) trading securities

B) options

C) available-for-sale securities

D) marketable securities

12) Jeff Company purchased common stock in Garcia Company.  Jeff Company treats the investment as available-for-sale securities.  During the current year, Garcia Company earned $4,000,000 and paid dividends of $1,000,000.  Assume that Jeff Company owns 10% of the outstanding shares of Garcia Company.  Garcia Company's net income will affect Jeff Company by ________.

A) increasing cash and investments by $400,000

B) increasing stockholders' equity and investments by $400,000

C) increasing cash and stockholders' equity by $400,000

D) no effect

13) Jeff Company purchased common stock in Gonzalez Company.  Jeff Company treats the investment as available-for-sale securities.  During the current year, Gonzalez Company earned $4,000,000 and paid dividends of $1,000,000.  Assume that Jeff Company owns 10% of the outstanding shares of Gonzalez Company.  Gonzalez Company's dividend will affect Jeff Company by ________.

A) increasing cash and investments by $100,000

B) increasing investments and stockholders' equity by $100,000

C) increasing cash and stockholders' equity by $100,000

D) increasing cash and decreasing investments by $100,000

14) Brian Company purchased 10% of the outstanding shares of Wilson Company.  Brian Company classifies the investments as trading securities.  At the end of the year, the market value of the shares increased.  The increase in market value of Wilson Company's shares will affect Brian Company by ________.

A) increasing cash and increasing investments

B) decreasing investments and increasing stockholders' equity

C) increasing investments and increasing stockholders' equity

D) increasing cash and increasing stockholders' equity

15) Herman Company acquired 10 percent of the voting stock of Hudson Company for $10 million.  Herman Company plans to keep the investment for several years.  At the end of Year 1, Hudson Company reports net income of $15 million and pays cash dividends of $5 million.  At the end of Year 1, the market value of Herman Company's investment in Hudson Company is $11 million.  What entry is necessary at the end of Year 1 to account for the change in market value of Herman Company's investment in Hudson Company?

A) No entry is needed.

B) Cash increases $11 million and Stockholders' equity increases $11 million.

C) Investments increase $11 million and Stockholders' equity increases $11 million.

D) Investments increase $1 million and Stockholders' equity increases $1 million.

16) Vince Company purchased common stock in Gill Company.  During the current year, Gill Company earned $4,000,000 and paid dividends of $1,000,000.  Assume that Vince Company owns 40 percent of the outstanding shares of Gill Company.  Gill Company's net income will affect Vince Company by ________.

A) increasing investments by $1,600,000

B) increasing investments and cash by $2,000,000

C) increasing cash and stockholders' equity by $400,000

D) increasing cash and decreasing investments by $1,600,000

17) Vince Company purchased common stock in Sanchez Company.  During the current year, Sanchez Company earned $4,000,000 and paid dividends of $1,000,000.  Assume that Vince Company owns 30% of the outstanding shares of Sanchez Company.  Sanchez Company's dividend will affect Vince Company by ________.

A) increasing cash and stockholders' equity by $300,000

B) increasing investments and stockholders' equity by $300,000

C) increasing cash and decreasing investments by $300,000

D) increasing cash and increasing investments by $300,000

18) Bobby Company purchased 40% of the outstanding shares of Wilson Company as a long-term investment.  At the end of the year, the market value of the shares increased.  The increase in market value of Wilson Company's shares will affect Bobby Company by ________.

A) increasing assets and increasing stockholders' equity

B) decreasing investments and increasing cash

C) increasing investments and increasing stockholders' equity

D) no effect

19) Rocky Company acquired 40% of the voting stock of Boulder Company for $40 million.  At the end of Year 1, Boulder Company reports net income of $15 million and pays cash dividends of $5 million.  At the end of Year 1, the market value of Rocky Company's investment in Boulder Company is $44 million.  The ________ method should be used by Rocky Company to account for the investment.

A) market-value

B) consolidated

C) cost

D) equity

20) Rocky Company acquired 40% of the voting stock of Boulder Company for $40 million.  At the end of Year 1, Boulder Company reports net income of $15 million and pays cash dividends of $5 million.  At the end of Year 1, the market value of Rocky Company's investment in Boulder Company is $44 million.  At the time of the acquisition, what accounts would be affected on the books of Rocky Company?

A) Cash decrease $40 million and Investments increase $40 million

B) Cash decrease $40 million and Stockholders' Equity increase $40 million

C) Investments increase $40 million and Accounts Payable increase $40 million

D) No entry

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