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7/28/2019 Download 52 MCQ the Accountant at Landry Company is Figuring Out
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Question 1
The accountant at Landry Company is figuring out the difference in income taxes the company will pay
depending on the choice of either FIFO or LIFO as an inventory costing method. The tax rate is 30% and
the FIFO method will result in income before taxes of $8,740. The LIFO method will result in income
before taxes of $7,900. What is the difference in tax that would be paid between the two methods?
Answer
$840
$588
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$252
Cannot be determined from the information provided.
2 points
Question 2
At May 1, 2012, Heineken Company had beginning inventory consisting of 100 units with a unit cost of
$7. During May, the company purchased inventory as follows:
200 units at $7
300 units at $8
The company sold 500 units during the month for $12 per unit. Heineken uses the average cost method.
The value of Heineken's inventory at May 31, 2012 is
Answer
$700
$750
$800
$4,500
2 points
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Question 3
At May 1, 2012, Heineken Company had beginning inventory consisting of 100 units with a unit cost of
$7. During May, the company purchased inventory as follows:
200 units at $7
300 units at $8
The company sold 500 units during the month for $12 per unit. Heineken uses the average cost method.
The average cost per unit for May is
Answer
$7.00.
$7.50.
$7.60.
$8.00.
2 points
Question 4
Which of the following terms best describes the assumption made in applying the four inventory
methods?
Answer
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Goods flow
Cost flow
Asset flow
Physical flow
2 points
Question 5
Classic Floors has the following inventory data:
July 1 Beginning Inventory 15 units at $8.00
July 5 Purchases 60 units at $8.80
July 14 Sale 40 units
July 21 Purchases 30 units $9.60
July 30 Sale 28 units
Assuming that a perpetual inventory system is used, what is the cost of goods sold on a LIFO basis forJuly?
Answer
$620.80
7/28/2019 Download 52 MCQ the Accountant at Landry Company is Figuring Out
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$315.20
$936.00
$464.00
2 points
Question 6
The specific identification method of inventory costing
Answer
always maximizes a company's net income.
always minimizes a company's net income.
has no effect on a company's net income.
may enable management to manipulate net income.
2 points
Question 7
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Piper Pipes has the following inventory data:
July 1 Beginning inventory 20 units at $120
July 5 Purchases 120 units at $112
July 14 Sale 80 units
July 21 Purchases 60 units at $115
July 30 Sale 56 units
Assuming that a periodic inventory system is used, what is the cost of goods sold on a LIFO basis.
Answer
$7,328
$7,348
$15,392.
$15,412
2 points
Question 8
Selection of an inventory costing method by management does not usually depend on
7/28/2019 Download 52 MCQ the Accountant at Landry Company is Figuring Out
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Answer
the fiscal year end.
income statement effects.
balance sheet effects.
tax effects.
2 points
Question 9
Goods held on consignment are
Answer
never owned by the consignee.
included in the consignee's ending inventory.
kept for sale on the premises of the consignor.
included as part of no one's ending inventory.
7/28/2019 Download 52 MCQ the Accountant at Landry Company is Figuring Out
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2 points
Question 10
Which inventory costing method should a gasoline retailer use?
Answer
Average cost
LIFO
FIFO
Either LIFO or FIFO.
2 points
Question 11
Which of the following companies would most likely have the highest inventory turnover?
Answer
An art gallery.
An automobile manufacturer.
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A piano manufacturer.
A bakery.
2 points
Question 12
Butler Company reported ending inventory at December 31, 2012 of $1,200,000 under LIFO. It also
reported a LIFO reserve of $210,000 at January 1, 2012, and $300,000 at December 31, 2012. Cost of
goods sold for 2012 was $4,100,000. If Butler Company had used FIFO during 2012, its cost of goods sold
for 2012 would have been
Answer
$4,400,000.
$4,190,000.
$4,010,000.
$3,800,000.
2 points
Question 13
7/28/2019 Download 52 MCQ the Accountant at Landry Company is Figuring Out
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A company just starting in business purchased three merchandise inventory items at the following
prices. First purchase $80; Second purchase $95; Third purchase $85. If the company sold two units for a
total of $240 and used FIFO costing, the gross profit for the period would be
Answer
$65.
$75.
$60.
$50.
2 points
Question 14
Dobler Company uses a periodic inventory system.
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Units Per Unit Price Total
Balance, 1/1/2012 200 $5.00 $1,000
Purchase, 1/15/2012 100 $5.30 $530
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Purchase, 1/28/2012 100 $5.50 $550
Details for the inventory account for the month of January 2012 are as follows: An end of the month
(1/31/2012) inventory showed that 140 units were on hand. If the company uses LIFO, what is the value
of the ending inventory?
Answer
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$737
$700
$762
$1,380
2 points
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Question 15
Dole Industries had the following inventory transactions occur during 2012:
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Units Cost/Unit
Feb.1, 2012 Purchase 54 $90
Mar. 14, 2012 Purchase 93 $94
May 1, 2012 Purchase 66 $98
The company sold 153 units at $126 each and has a tax rate of 30%. Assuming that a periodic inventory
system is used, and operating expenses of $2,000, what is the company's after-tax income using LIFO?
(rounded to whole dollars)
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Answer
$2,632
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$3,242
$2,162
$1,842
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2 points
Question 16
Which statement regarding negative cash balances is true?
Answer
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The amount is offset against other current assets because users need to know net current assets.
The amount is shown as a current liability because a company cannot have a cash balance below zero.
The company must obtain a loan to bring the cash balance to zero before financial statements are
prepared.
The negative cash balance is included as a current asset and discussed in a footnote to the financial
statements.
2 points
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Question 17
Internal auditors
Answer
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are hired by CPA firms to audit business firms.
are employees of the IRS who evaluate the internal controls of companies filing tax returns.
evaluate the system of internal controls for the companies that employ them.
cannot evaluate the system of internal controls of the company that employs them because they are not
independent.
2 points
Question 18
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Collier Company has implemented a just-in-time system, which relies on suppliers to deliver goods for
resale as needed. This implementation is most consistent with which of the following basic principles of
cash management?
Answer
Increasing the speed of receivables collection.
7/28/2019 Download 52 MCQ the Accountant at Landry Company is Figuring Out
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Planning the timing of major expenditures.
Keeping inventory levels low.
Delaying the payment of liabilities.
2 points
Question 19
Entries are made to the Petty Cash account when
7/28/2019 Download 52 MCQ the Accountant at Landry Company is Figuring Out
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Answer
establishing the fund.
making payments out of the fund.
recording shortages in the fund.
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replenishing the fund.
2 points
Question 20
Internal control is defined, in part, as a plan that safeguards
Answer
7/28/2019 Download 52 MCQ the Accountant at Landry Company is Figuring Out
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all balance sheet accounts.
assets.
liabilities.
capital stock.
7/28/2019 Download 52 MCQ the Accountant at Landry Company is Figuring Out
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2 points
Question 21
If a check correctly written and paid by the bank for $471 is incorrectly recorded on the company's
books for $417, the appropriate treatment on the bank reconciliation would be to
Answer
7/28/2019 Download 52 MCQ the Accountant at Landry Company is Figuring Out
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add $54 to the book's balance.
subtract $54 from the book's balance.
deduct $54 from the bank's balance.
deduct $471 from the book's balance.
2 points
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Question 22
A credit balance in Cash Over and Short account is shown as
Answer
7/28/2019 Download 52 MCQ the Accountant at Landry Company is Figuring Out
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an asset.
a liability.
a revenue.
an expense.
2 points
Question 23
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Under the allowance method of accounting for bad debts, why must uncollectible accounts receivable
be estimated at the end of the accounting period?
Answer
To allow the collection department to schedule work for the next accounting period.
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To determine the gross realizable value of accounts receivable.
The IRS rules require the company to make the estimate.
To match bad debt expense to the period in which the revenues were earned.
2 points
Question 24
In 2012 the Golic Co. had net credit sales of $900,000. On January 1, 2012, the Allowance for Doubtful
Accounts had a credit balance of $19,000. During 2012, $36,000 of uncollectible accounts receivable
were written off. Past experience indicates that the allowance should be 10% of the balance in
receivables (percentage of receivable basis). If the accounts receivable balance at December 31 was
7/28/2019 Download 52 MCQ the Accountant at Landry Company is Figuring Out
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$240,000 what is the required adjustment to the Allowance for Doubtful Accounts at December 31,
2012?
Answer
$24,000.
$41,000.
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$43,000.
$36,000.
2 points
Question 25
An analysis and aging of the accounts receivable of Watts Company at December 31 reveal these data:What is the cash realizable value of the accounts receivable at December 31 after adjustment?
Accounts receivable $ 3,200,000
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Allowance for doubtful accounts per books before adjustment (credit) 200,000
Amounts expected to become uncollectible 260,000
Answer
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$2,740,000
$3,000,000
$3,200,000
$2,940,000
2 points
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Question 26
When the allowance method is used to account for uncollectible accounts, Bad Debts Expense is debited
when
Answer
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a sale is made.
an account becomes bad and is written off.
management estimates the amount of uncollectibles.
a customer's account becomes past due.
2 points
Question 27
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Using the allowance method, the uncollectible accounts for the year are estimated to be $35,000. If the
balance for the Allowance for Doubtful Accounts is a $9,000 credit before adjustment, what is the
balance after adjustment?
Answer
$9,000
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$26,000
$35,000
$44,000
2 points
Question 28
The following information is related to December 31, 2011 balances.
7/28/2019 Download 52 MCQ the Accountant at Landry Company is Figuring Out
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Accounts receivable $525,000
Allowance for doubtful accounts (credit) (45,000)
Cash realizable value 480,000
During 2012 sales on account were $145,000 and collections on account were $86,000. Also, during
2012 the company wrote off $8,000 in uncollectible accounts. An analysis of outstanding receivable
accounts at year end indicated that bad debts should be estimated at $54,000. Bad debt expense for
2012 is:
Answer
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$17,000.
$9,000.
$54,000.
$1,000.
2 points
Question 29
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Two methods of accounting for uncollectible accounts are the
Answer
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allowance method and the accrual method.
allowance method and the net realizable method.
direct write-off method and the accrual method.
direct write-off method and the allowance method.
2 points
Question 30
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The retailer considers Visa and MasterCard sales as
Answer
cash sales.
promissory sales.
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credit sales.
contingent sales.
2 points
Question 31
An aging of a company's accounts receivable indicates that $4,000 are estimated to be uncollectible. If
Allowance for Doubtful Accounts has a $1,600 debit balance, the adjustment to record bad debts for the
period will require a
Answer
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debit to Bad Debts Expense for $4,000.
debit to Bad Debt Expense for $5,600.
debit to Bad Debts Expense for $2,400.
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credit to Allowance for Doubtful Accounts for $5,000.
2 points
Question 32
When an account is written off using the allowance method, accounts receivable
Answer
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is unchanged and the allowance account increases.
increases and the allowance account increases.
decreases and the allowance account decreases.
decreases and the allowance account increases.
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2 points
Question 33
The direct write-off method of accounting for uncollectible accounts
Answer
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emphasizes the matching of expenses with revenues.
emphasizes balance sheet relationships.
emphasizes cash realizable value.
is not generally accepted as a basis for estimating bad debts.
2 points
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Question 34
Simonic Retailers accepted $75,000 of Citibank Visa credit card charges for merchandise sold on July 1.
Citibank charges 4% for its credit card use. The entry to record this transaction by Simonic Retailers will
include a credit to Sales of $75,000 and a debit(s) to:
Answer
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Cash $72,000 and Service Charge Expense $3,000.
Accounts Receivable $72,000 and Service Charge Expense $3,000.
Cash $72,000 and Interest Expense $3,000.
Accounts Receivable $75,000.
2 points
Question 35
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Research and development costs
Answer
are classified as intangible assets.
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must be expensed when incurred under generally accepted accounting principles.
should be included in the cost of the patent they relate to.
are capitalized and then amortized over a period not to exceed 20 years.
2 points
Question 36
A company has the following assets:
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Buildings and Equipment,
less accumulated depreciation of $5,000,000 $30,000,000
Copyrights $2,400,000
Patents $10,000,000
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Land $12,000,000
The total amount reported under Property, Plant, and Equipment would be
Answer
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$54,400,000.
$42,000,000.
$52,000,000.
$44,400,000.
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2 points
Question 37
A machine with a cost of $240,000 has an estimated salvage value of $15,000 and an estimated useful
life of 5 years or 15,000 hours. It is to be depreciated using the units-of-activity method of depreciation.
What is the amount of depreciation for the second full year, during which the machine was used 5,000
hours?
Answer
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$75,000.
$45,000.
$65,000.
$80,000.
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2 points
Question 38
Hopson Company incurred $450,000 of research and development costs in its laboratory to develop a
new product. It spent $60,000 in legal fees for a patent granted on January 2, 2012. On July 31, 2012,
Hopson paid $45,000 for legal fees in a successful defense of the patent. What is the total amount that
should be debited to Patents through July 31, 2012?
Answer
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$450,000.
$105,000.
$555,000.
Some other amount.
2 points
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Question 39
The following information is provided for Nguyen Company and Northwest Corporation.
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Nguyen Company
(in $ millions) Northwest Corporation
(in $ millions)
Net income 2012 $275 $390
Net sales 2012 $1,500 $4,100
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Total assets 12/31/10 $1,000 $2,400
Total assets 12/31/11 $1,050 $3,000
Total assets 12/31/12 $1,150 $4,000
If Nguyen and Northwest are in the same industry and the industry average for the asset turnover ratio
is equal to 1.20 times, which of the following statements is true?
Answer
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Nguyen is operating more efficiently than the industry.
Northwest is operating more efficiently than Nguyen.
Both Nguyen and Northwest are operating more efficiently than the average company in their industry.
The asset turnover ratio does not address the question of efficient operations.
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2 points
Question 40
Recording depreciation each period is necessary in accordance with the
Answer
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going concern principle.
cost principle.
expense recognition principle.
asset valuation principle.
2 points
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Question 41
The cost of successfully defending a patent in an infringement suit should be
Answer
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charged to Legal Expenses.
deducted from the book value of the patent.
added to the value of the patent.
recognized as a loss in the current period.
2 points
Question 42
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Management should select the depreciation method that
Answer
is easiest to apply.
best measures the plant asset's market value over its useful life.
7/28/2019 Download 52 MCQ the Accountant at Landry Company is Figuring Out
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best measures the plant asset's contribution to revenue over its useful life.
has been used most often in the past by the company.
2 points
Question 43
A truck costing $30,000 and on which $26,000 of accumulated depreciation has been re-corded wasdiscarded as having no value. The entry to record this event would include a
Answer
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gain of $4,000.
loss of $4,000.
credit to Accumulated Depreciation for $26,000.
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credit to Accumulated Depreciation for $30,000.
2 points
Question 44
Grant Company has decided to change the estimate of the useful life of an asset that has been in service
for 2 years. Which of the following statements describes the proper way to revise a useful life estimate?
Answer
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Revisions in useful life are permitted if approved by the IRS.
Retroactive changes must be made to correct previously recorded depreciation.
Only future years will be affected by the revision.
Both current and future years will be affected by the revision.
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2 points
Question 45
Wesley Hospital installs a new parking lot. The paving cost $30,000 and the lights to illuminate the new
parking area cost $12,000. Which of the following statements is true with respect to these additions?
Answer
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$30,000 should be debited to the Land account.
$12,000 should be debited to Land Improvements.
$42,000 should be debited to the Land account.
$42,000 should be debited to Land Improvements.
2 points
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Question 46
A loss on disposal of a plant asset is reported in the financial statements
Answer
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in the Other Revenues and Gains section of the income statement.
in the Other Expenses and Losses section of the income statement.
as a direct increase to the capital account on the balance sheet.
as a direct decrease to the capital account on the balance sheet.
2 points
Question 47
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Expenditures that maintain the operating efficiency and expected productive life of a plant asset are
generally
Answer
expensed when incurred.
capitalized as a part of the cost of the asset.
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debited to the Accumulated Depreciation account.
not recorded until they become material in amount.
2 points
Question 48
Kathy's Blooms purchased a delivery van for $40,000. The company was given a $4,000 cash discount bythe dealer, and paid $2,000 sales tax. Annual insurance on the van is $1,000. As a result of the purchase,
by how much will Kathy's Blooms increase its van account?
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Answer
$40,000.
$36,000.
$39,000.
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$38,000.
2 points
Question 49
A truck costing $42,000 and on which $35,000 of accumulated depreciation has been recorded was
discarded as having no value. The entry to record this event would include a
Answer
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gain of $7,000.
loss of $7,000.
credit to Accumulated Depreciation for $35,000.
credit to Accumulated Depreciation for $42,000.
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2 points
Question 50
At the time of acquisition of a debt investment
Answer
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no journal entry is required.
the cost principle applies.
the Stock Investments account is debited when bonds are purchased.
the investment account is credited for its cost plus brokerage fees.
2 points
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Question 51
Which of the following is not a method of accounting for stock investments?
Answer
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Cost method.
Stock method.
Consolidated financial statements.
Equity method.
2 points
Question 52
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Hagen Company had these transactions pertaining to stock investments:
Feb. 1 Purchased 2,500 shares of Farley Company (10%) for $41,500 cash plus brokerage fees of $1,000.
June 1 Received cash dividends of $2 per share on Farley stock.
Oct. 1 Sold 1,000 shares of Farley stock for $20,000 less brokerage fees of $500.
Dec. 1 Received cash dividends of $2 per share on Farley stock.
The entry to record the receipt of the dividends June 1 would include a
Answer
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debit to Stock Investments of $5,000.
credit to Dividend Revenue of $5,000.
debit to Dividend Revenue of $5,000.
credit to the Stock Investments of $5,000.
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