21 aurum services inc acquired 100 000 shares of gamma metals inc on january 1 2015 4306611

21 aurum services inc acquired 100 000 shares of gamma metals inc on january 1 2015 4306611

21) Aurum Services Inc. acquired 100,000 shares of Gamma Metals Inc. on January 1, 2015. Gamma declares a cash dividend of $0.25 per share on February 15, 2015 and pays the cash dividend on March 2, 2015. With the current investment, Aurum Services Inc. holds 8% of Gamma's voting stock. Which of the following will be the correct journal entry for the day when the dividend payment is made (March 2, 2015)?

A)

Cash

25,000

    Long-term Investments—Trading Investments

25,000

B)

Cash

25,000

    Long-term Investments—Available-for-Sale

5,000

C) No Entry

D)

Cash

25,000

     Dividend Revenue

25,000

22) When a company receives a dividend payment for available-for-sale investments, ________.

A) the total assets will remain unaffected

B) the long-term assets will decrease

C) the total equity will increase

D) the total liabilities will decrease

23) Gray Financial Services Inc. invested $15,000 to acquire 3,750 shares of Mitt Investments Inc. on March 15, 2012. This investment represents less than 20% of the investee's voting stock. On May 7, 2016, Greg Financial Services Inc. sells 1,750 shares for $12,250. When the transaction is recorded in a journal entry, ________.

A) Gain on Disposal will be credited

B) Long-term Investments—Available-for-Sale will be debited

C) Cash will be credited

D) Long-term Investments—Held-to-Maturity will be debited

24) Gray Financial Services Inc. invested $15,000 to acquire 3,750 shares of Mitt Investments Inc. on March 15, 2012. This investment represents less than 20% of the investee's voting stock. On May 7, 2016, Greg Financial Services Inc. sells 1,750 shares for $12,250. In the balance sheet at May 7, 2016, ________.

A) total assets will remain unchanged

B) total assets will decrease

C) total liabilities will decrease

D) total equity will increase

25) Greg Financial Services Inc. invested $15,000 to acquire 3,750 shares of Mitt Investments Inc. on March 15, 2012. This investment represents less than 20% of the investee's voting stock. On May 7, 2016, Greg Financial Services Inc. sells 1,750 shares for $12,250. Which of the following will be the correct journal entry for this transaction?

A)

Gain on Disposal

12,250

       Long-term Investments—Available-for-Sale

12,250

B)

Cash

12,250

       Gain on Disposal

12,250

C)

Cash

12,250

       Long-term Investments—Available-for-Sale

7,000

       Gain on Disposal

5,250

D)

Cash

12,250

       Long-term Investments—Available-for-Sale

12,250

26) The Gain on Disposal from trading securities is a(n) ________.

A) current asset account

B) fixed asset account

C) liability account

D) equity account

27) The Gain on Disposal of Trading Securities is reported in the ________.

A) other revenues and expenses section of the income statement

B) stockholders' equity section of the income statement

C) current assets section of the balance sheet

D) fixed assets section of the balance sheet

28) A ________ ownership in the investee's voting stock can significantly influence the investee's decisions.

A) 10%

B) 5% to 10%

C) 15% to 20%

D) 20% to 50%

29) Beige Corporation pays $500,000 to acquire 40% of the equity securities of Olive Technologies Inc. on May 5, 2015. This investment will be classified as a(n) ________.

A) trading investment

B) available-for-sale

C) significant interest investment

D) held-to-maturity

30) Beige Corporation pays $500,000 to acquire 40% of the equity securities of Olive Technologies Inc. on May 5, 2015. Which of the following will be included in the journal entry to record this transaction?

A) Long-term Investments—Trading Investments will be debited by $500,000.

B) Long-term Investments—Olive Technologies Inc. will be debited by $500,000.

C) Long-term Investments—Available-for-Sale will be debited by $500,000.

D) Long-term Investments—Available-for-Sale will be credited by $500,000.

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