Question 1
1. The rule-making authority within the U.S. that is responsible for promulgating new financial accounting standards is the 0a. Federal Accounting Standards Board. 0b. American Institute of Certified Public Accountants. 0c. International Accounting Standards Board. 0d. Institute of Management Accountants. 0e. Financial Accounting Standards Board. 2. The four primary financial statements included in corporate annual reports are the 0a. Balance Sheet, Income Statement, Statement of Retained Earnings, and Statement of Working Capital. 0b. Income Statement, Statement of Assets, Cash Flow Statement, and Statement of Fund Balance. 0c. Statement of Equity, Statement of Income, Statement of Cash Flows, and Balance Sheet. 0d. Balance Sheet, Income Statement, Statement of Stockholders? Equity, and Statement of Cash Flows. 0e. Statement of Fund Balance, Statement of Equity, Balance Sheet, and Income Statement. 3. Respectively, ___ are resources that an organization owns; ___ is/are debts that an organization owes; and ___ is/are amounts that owners have contributed and what the entity has earned for them. 0a. assets; liabilities; revenues 0b. assets; liabilities; stockholders? equity 0c. assets; stockholders? equity; liabilities 0d. revenues; liabilities; expenses 0e. revenues; liabilities; stockholders? equity 4. The financial statement that summarizes a business?s revenues and expenses for a specific time period is the 0a. Balance Sheet. 0b. Income Statement. 0c. Statement of Stockholders? Equity. 0d. Statement of Cash Flows. 0e. Statement of Fund Balance. 5. Amounts owed to a business by customers are called 0a. cash. 0b. short-term investments. 0c. accounts payable. 0d. accounts receivable. 0e. revenue. 6. Amounts owed by businesses to third parties are known as 0a. assets. 0b. liabilities. 0c. stockholders? equity. 0d. revenues. 0e. expenses. 7. A debt or obligation that will be eliminated by giving up current assets or incurring a current liability is a 0a. prepaid asset. 0b. current asset. 0c. current liability. 0d. long-term asset. 0e. long-term liability. 8. Lima Co. has received $12,000 for future subscriptions to The Bean Magazine. Lima should record this amount as a(an) 0a. long-term investment. 0b. earned revenue. 0c. account receivable. 0d. expense. 0e. unearned revenue. 9. In 2007, Alca Co. issued a long-term note payable that would come due on May 15, 2011. On its December 31, 2010 balance sheet, this note should be classified as a(an) 0a. long-term liability. 0b. short-term liability. 0c. intangible asset. 0d. long-term investment. 0e. expense. 10. The owners? interest in a corporation is represented by 0a. total assets. 0b. long-term liabilities. 0c. total stockholders? equity. 0d. common stock. 0e. revenues. 11. A share of ownership in a corporation is known as 0a. common stock. 0b. par value. 0c. additional paid-in capital. 0d. retained earnings. 0e. an expense. 12. The specific dollar amount printed on each stock certificate is the 0a. book value. 0b. par value. 0c. net realizable value. 0d. net present value. 0e. market value. 13. When a share of stock is first sold, the amount received by the company may be different from the amount printed on the stock certificate. Any amount over that printed amount will be recognized in which of the following accounts? 0a. Common Stock. 0b. Retained Earnings 0c. Revenue from Stock Sales 0d. Additional Paid-In Capital 0e. Long-Term Investment 14. The total amount of profits generated by a company and not distributed as dividends to stockholders is called 0a. revenue. 0b. common stock. 0c. par value. 0d. additional paid-in capital. 0e. retained earnings. 15. The difference between sales revenue and cost of goods sold during a period is 0a. gross profit. 0b. net income. 0c. operating income. 0d. retained earnings. 0e. accounts receivable. 16. GAAP refers to 0a. government adjusted accounting principles. 0b. generally accepted accounting principles. 0c. general accrual accounting principles. 0d. granted annual accounting period. 0e. governmentally approved accounting principles. 17. The requirement for publicly owned companies to issue quarterly and annual financial statements is mandated by the 0a. Securities and Exchange Commission. 0b. Financial Accounting Standards Board. 0c. New York Stock Exchange. 0d. Internal Revenue Service. 0e. American Institute of CPAs. 18. Requiring the transactions of a business be accounted for separately from the personal transactions of its owners reflects the 0a. entity concept. 0b. historical cost principle. 0c. unit of measurement concept. 0d. going concern assumption. 0e. revenue recognition rule. 19. A trial balance is prepared at the end of the accounting period 0a. and lists all accounts contained in the chart of accounts. 0b. and lists all general ledger accounts and their balances. 0c. and, if debits equal credits, verifies that the accounting records are correct. 0d. to determine that revenues and expenses are equal. 0e. to determine that the balance sheet is in balance. 20. In a perpetual inventory system, 0a. the Inventory and Cost of Goods Sold accounts are updated once a period. 0b. temporary accounts, such as Purchases and Purchase Discounts, are used. 0c. the availability of computer technology is generally not considered important. 0d. a purchase of goods would require a debit to Inventory and a credit to either Cash or Accounts Payable. 0e. no entry is made for Cost of Goods Sold expense when goods are sold to customers. 21. When goods are shipped 0a. FOB shipping point, the buyer obtains legal title to the goods when the goods are received by the buyer. 0b. FOB destination, the seller retains legal title to the goods until the goods reach the shipping point. 0c. FOB shipping point, the buyer obtains legal title to the goods when the goods are shipped and also pays for the related delivery charges. 0d. FOB destination point, the buyer obtains legal title to the goods when the goods reach the shipping point and the seller pays for the related delivery charges. 0e. FOB shipping point, the seller retains legal title to the goods until the goods reach the buyer but the buyer pays for the related delivery charges. 22. When LIFO perpetual inventory costing is used, which costs are included in ending inventory and cost of goods sold? Ending inventory Cost of goods sold 0a. Newest Oldest 0b. Oldest Newest 0c. Newest Average 0d. Oldest Average 0e. Average Average 23. A depreciation method that allocates an equal amount of depreciation expense to each year of an asset?s estimated useful life is the 0a. amortization method. 0b. double-declining balance method. 0c. straight-line method. 0d. allowance estimation method. 0e. units-of-production method. 24. A depreciation method under which annual depreciation expense is computed by multiplying twice the straight-line rate times an asset?s book value at the beginning of the year is the 0a. amortization method. 0b. double-declining balance method. 0c. straight-line method. 0d. allowance estimation method. 0e. units-of-production method. 25. A depreciation method in which depreciation expense for any given period is a function of the level of asset usage during that period is the 0a. amortization method. 0b. double-declining balance method. 0c. straight-line method. 0d. allowance estimation method. 0e. units-of-production method. On January 1, 2010, Run & Go Pizza purchased a delivery truck for $50,000. The truck has a $5,000 salvage value and a four-year (or 56,250 miles) useful life. During 2010, the company put 15,750 miles on the delivery truck. 26. If Run & Go uses the straight-line method, how much depreciation expense should Run & Go recognize in 2010? 0a. $ 3,150 0b. $ 3,500 0c. $11,250 0d. $12,500 0e. none of the above 27. If Run & Go uses the double-declining balance method, how much depreciation expense should Run & Go recognize in 2010? 0a. $ 6,300 0b. $ 7,000 0c. $22,500 0d. $25,000 0e. none of the above 28. If Run & Go uses the units-of-production method, how much depreciation expense should Run & Go recognize in 2010? 0a. $ 8,000 0b. $ 9,000 0c. $11,250 0d. $12,500 0e. $12,600 29. Allocating the cost of natural resources to the periods these assets provide economic benefit to an entity is called 0a. amortization. 0b. depletion. 0c. depreciation. 0d. deterioration. 0e. degradation. 30. A contract between a corporation and the state in which it was created and identifies the corporation?s principal rights and obligations is called 0a. articles of indemnification. 0b. consent decree. 0c. corporate by-laws. 0d. corporate charter. 0e. corporate indenture. 31. The maximum number of shares that a corporation may issue is called the number of 0a. authorized shares. 0b. common shares. 0c. outstanding shares. 0d. preferred shares. 0e. issued shares. 32. The class of stock comprising the residual ownership interest in a corporation is called 0a. common stock. 0b. issued stock. 0c. preferred stock. 0d. treasury stock. 0e. collateralized stock. Grambling Corporation issued 500 shares of common stock for $22 per share. 33. If the common stock is no par value, how should Grambling record this transaction? 0a. Common Stock 11,000 Cash 11,000 0b. Cash 11,000 Additional Paid-In Capital 11,000 0c. Cash 11,000 Common Stock 500 Additional Paid-In Capital 10,500 0d. Cash 11,000 Common Stock 11,000 0e. Cash 11,000 Stockholders? Equity 11,000 34. If the common stock has a $5 par value, how should Grambling record this transaction? 0a. Common Stock 11,000 Cash 11,000 0b. Cash 11,000 Additional Paid-In Capital 11,000 0c. Cash 11,000 Common Stock 2,500 Additional Paid-In Capital 8,500 0d. Cash 11,000 Common Stock 11,000 0e. Cash 11,000 Stockholders? Equity 11,000 35. Companies typically want to have the most stability in generating positive cash flows from 0a. investing activities. 0b. operating activities. 0c. investing activities. 0d. property, plant and equipment sales. 0e. sales of common, rather than preferred, stock. 36. During 2010, Bates Company earned net income of $275,000 which included depreciation expense of $34,000. The company had a loss on the sale of equipment of $2,000 and the following changes in account balances occurred: Increase in accounts payable $12,000 Increase in inventory 9,000 Decrease in accounts receivable 8,000 Decrease in prepaid expenses 10,000 Decrease in accrued liabilities 7,000 Based upon this information, what amount will be shown for net cash provided by operating activities for 2010? 0a. $289,000 0b. $307,000 0c. $321,000 0d. $323,000 0e. $325,000 37. The level of sales at which no profits are generated and no losses are incurred is the 0a. break-even point. 0b. contribution margin. 0c. degree of operating leverage. 0d. gross margin. 0e. margin of safety. 38. Contribution margin is 0a. revenue remaining after product and period costs are covered. 0b. sales less cost of goods sold. 0c. revenue remaining after variable costs are covered. 0d. also known as gross profit margin. 0e. constant even when there is a change in unit selling price. 39. Anthony Industries manufactures lawnmowers. The selling price of a lawnmower is $300 and variable costs are $180 per unit. Fixed costs are $1,200,000 per period. What is Anthony?s break-even point in units? 0a. 4,000 0b. 6,667 0c. 10,000 0d. 1,200,000 0e. none of the above. 40. A cost that changes on a per-unit basis inversely with changes in activity levels is a(an) 0a. fixed cost. 0b. indirect cost. 0c. mixed cost. 0d. direct cost. 0e. variable cost.
Question 3
1. A business cannot be taxed as a corporation unless it is incorporated under local law. True/False 2. A partnership is not a tax-paying entity. True/False 3. When a corporation receives property from a shareholder its basis equals that of the shareholder, increased by any gain recognized by the shareholder. True/False 4. In a Code Sec. 351 transfer, liabilities cannot trigger gain, unless they exceed the aggregate basis of property transferred. True/False 5. Depreciation claimed on a given asset will never be recaptured upon a Code Sec. 351 transfer. Tue/False 6. A corporation must make all the same adjustments as an individual when computing its net operating loss. True/False 7. Which of the following items are eligible for immediate expensing and 180-month amortization? (1.) Fee to CPA to handle Subchapter S election (2.) Refreshments served at organizational meetings (3.) Underwriting commission (4.) Legal fees in connection with incorporation (5.) Recording fees upon transfer of assets to corporation a. (2), (4), and (5) b. (1), (2), and (5) c. (1), (2), (3), (4), and (5) d. (1), (2), and (4) 8. Sandra Sherman incorporates her apartment building. It has a basis of $50,000, a value of $150,000, is subject to a mortgage of $70,000 and has a depreciation recapture potential of $12,000. If Sandra receives stock worth $80,000, she will recognize: a. No gain. b. $30,000 of gain, $12,000 of which is ordinary. c. $12,000 of ordinary income. d. $20,000 of gain, $12,000 of which is ordinary. 9. Evan Erman transferred inventory to a corporation in a Code Sec. 351 transaction. His basis in the inventory was $10,000 and its value was $8,000. If he received $2,000 in cash and 100 shares of stock, the resulting bases are: a. Evan?s stock: $8,000; Corporation?s inventory: $10,000 b. Evan?s stock: $10,000; Corporation?s inventory: $10,000 c. Evan?s stock: $10,000; Corporation?s inventory: $8,000 d. Evan?s stock: $8,000; Corporation?s inventory: $12,000 10. Exclusive of capital transactions, Pixie Corp. had $100,000 of taxable income. Its capital gains and losses were: Short-term gain $10,000 Long-term gain 12,000 Short-term loss (20,000) Long-term loss 5,000 Pixie?s taxable income for the year was: a. $97,000 b. $122,000 c. $100,000 d. $107,000 11. Two sole proprietors in the same business join their businesses by incorporating. Harvey Holmes transfers assets with a total basis of $10,000 and a value of $40,000 for 40 shares of stock. Mortimer Morgan transfers assets with a total basis of $15,000, subject to liabilities of $50,000, with a value of $110,000, for 60 shares of stock. The following statements about the transaction are all false, except: a. Since transferred liabilities of $50,000 exceed aggregate basis of $25,000, both parties must recognize gain. b. Harvey may have a different basis and holding period in different shares of the stock received. c. Most likely, there will be some general business tax credit recapture upon the transfer of assets to the corporation. d. At least one of the parties may have compensation income in the above transaction. 12. When comparing corporate and individual taxation the following statements are true, except: a. Individuals have exemptions and a standard deduction, corporations do not. b. Both types of taxpayers have percentage limitations on the charitable contribution deduction, coupled with a carryover of the excess contribution. c. All taxpayers may carry net operating losses back three years, forward 15. d. Both corporate and individual taxpayers may have a long-term capital loss carryforward. 13. Kevin Broid owns all the stock of Dana Corporation. During the year, Kevin sold a building to Dana for $150,000. The building cost $120,000, its adjusted basis was $94,000, and it was depreciated under the straightline method. Dana intends to use the building in its operations. Kevin?s tax consequences of the sale are: a. $56,000 dividend income b. $56,000 ordinary income c. $56,000 Code Sec. 1231 gain d. $26,000 ordinary income and $30,000 Code Sec. 1231 gain e. $56,000 long-term capital gain 14. Future, Inc. reported the following results for the year: Net income per books $110,000 Federal income taxes 36,170 Life insurance proceeds on key employee 15,000 Tax-exempt interest income 13,000 Net capital loss 25,000 Future?s taxable income for the year was: a. $123,170 b. $143,170 c. $72,000 d. $135,000 e. $107,000 15. Ben Brown transferred property that had an adjusted basis to him of $40,000 and a fair market value of $50,000 to Crackers Corporation in exchange for 100 percent of Crackers?s only class of stock and $15,000 cash. At the time of the transfer, the stock had a fair market value of $35,000. What is the amount of gain to be recognized by Ben? a. $0 b. $10,000 c. $15,000 d. $25,000 16. Sue Smith transferred a building that had an adjusted basis to her of $75,000 and a fair market value of $150,000 to Jumbo Corporation solely in exchange for 100 percent of Jumbo?s only class of stock. The building was subject to a mortgage of $100,000, which Jumbo assumed for bona fi de business purposes. The fair market valueof the stock at the date of transfer was $50,000. What is the amount of gain to be recognized by Sue? a. $0 b. $25,000 c. $50,000 d. $75,000 17. The check-the-box election to be taxed as a corporation applies to: a. corporations b. partnerships c. trusts d. all of the above e. none of the above 18. When deciding if a corporate instrument is debt or equity, the IRS will consider: a. the corporation?s debt to equity ratio b. if the debt is convertible into stock c. the relationship between stock and debt ownership percentages d. if the debt is preferred over or subordinate to other debt e. all of the above f. none of the above 19. Poco Co. incurs expenses for investigating whether to expand its present business. a. deduct them when incurred b. deduct them only if Poco Co. goes through with the expansion c. capitalize them and amortize them over 60 months d. capitalize and expense when the firm liquidates e. none of the above 20. The following entities are not subject to double taxation except: a. partnership b. sole proprietorship c. C corporation d. S corporation e. all are subject to double taxation 21. Under the ?check-the-box? system, which of the following entities could not select, or qualify for, corporate status? a. sole proprietorship b. partnership c. associations d. none of the above may elect or qualify for corporate status e. all of the above may elect or qualify for corporate status 22. The provisions of Code Sec. 351 are: a. Optional if elected by a majority of the shareholders b. Optional if elected by all the shareholders c. Optional if elected by the corporation d. Mandatory 23. Susan has a gain on the transfer of property to a corporation. In order for Susan to have no gain recognition under Code Sec. 351, she must receive: a. stock and securities b. securities only c. stock only d. the shareholder may receive any type of property from the corporation 24. Corporations and individuals differ in that: a. corporations are not permitted tax credits b. corporations are not entitled to exclusions c. corporations do not have for AGI and from AGI deductions d. like-kind exchange provisions do not apply to corporations 25. Bob owns all 50 shares of Max Company, valued at $50,000. His friend, Lee, owns equipment worth $50,000. Lee?s adjusted basis in the equipment is $20,000. Lee transfers the equipment to Max Company in exchange for 50 shares. Lee has a: a. $30,000 realized and $30,000 recognized gain b. $30,000 realized and $0 recognized gain c. $0 realized and $0 recognized gain d. none of the above 26. John Jergen?s stock basis is $3,000 and he has owned it for two years. If E&P is $4,000 and John receives a distribution of $12,000, the result is a dividend of $4,000, a return of capital of $3,000, and a long-term capital gain of $5,000. True/False 27. Land with a basis of $2,000 and a value of $50,000 is distributed to an individual shareholder who has dividend income of $50,000. Consequently, E&P is reduced by $50,000. True/False 28. A shareholder receives a tax-free preferred stock dividend on her common stock. Subsequently, she sells both her common and preferred stock to her aunt. She will not have any dividend income. True/False 29. A corporation must recognize a gain if it distributes property with a liability in excess of adjusted basis. True/False 30. If a distribution qualifies as a partial liquidation then all shareholders receive sale or exchange treatment on the redemption. True/False 31. Unreasonable compensation is one type of constructive or disguised dividend. True/False 32. A distribution by a corporation can never make its E&P negative. True/False 33. Arrow, Inc. has an accumulated defi cit of $3,000. This year it distributes $15,000 to its shareholders. How much of the amount is a dividend if the current year?s books reveal the following items: Taxable income $2,000 Proceeds from key-man life insurance $10,000 Interest from Iowa City bonds $5,000 Capital loss 4,000 a. $10,000 b. $0 c. $13,000 d. $2,000 34. Bulls & Bears, Inc., a securities dealer, had E&P of $2,000 when it distributed securities with a basis of $3,000 and a value of $10,000 to a 30 percent shareholder, Eunice. As a result of the distribution, E&P is: a. Reduced by $3,000 b. Increased by $7,000 c. Increased by $7,000, then reduced by $9,000 d. Reduced by $10,000 35. A distribution to the shareholders of stock in the distributor constitutes a taxable dividend, except for the following: a. Distribution of preferred stock to the common shareholders b. Proportionate distribution of common stock to the common shareholders, where they all could have taken cash instead, but nobody did c. Distribution of convertible preferred stock to any shareholder d. Distribution of common stock to the preferred stockholders 36. A tract of land is distributed to Martha Moore as a dividend. Its basis immediately prior to the distribution was $40,000, its value is $80,000, and it is subject to a mortgage of $55,000. The following statements concerning the distribution are all false except: a. E&P is increased by $15,000 (liability less basis), decreased by $40,000 and increased by the liability. b. The net adjustment to the E&P account is $40,000, the amount of the realized gain. c. The distributing corporation?s realized gain of $40,000 is recognized to the extent of the $15,000. d. The shareholder?s basis in the land is $80,000, its fair market value. 37. General Company has four equal shareholders who are unrelated. Each shareholder owns 300 shares of stock. During the year General redeemed 150 shares from Michael, 75 shares from Joseph, and 40 shares from John. The redemption was substantially disproportionate for: a. Michael and Joseph b. Michael and John c. Joseph only d. Michael only e. None 38. A corporation generally recognizes gains and losses on sales of property during a complete liquidation. True/False 39. E&P generally disappear upon liquidation. True/False 40. If a shareholder assumes a liability on property in a liquidating distribution, the amount of assumed liability always affects the amount of gain recognized by the liquidating corporation. True/False 41. The Trap Corporation liquidates. One shareholder, who owned 30 percent of the stock, receives for the stock, inventory worth $90,000 with a basis of $70,000. Trap Corporation will recognize: a. $20,000 of capital gain b. $20,000 of ordinary income c. $20,000 of Sec. 1231 gain d. No gain 42. Rapid, Inc., a cash basis corporation, distributes $30,000 of accounts receivable to Sylvester, an individual shareholder, in cancellation of his stock, pursuant to a plan of complete liquidation. If Sylvester?s basis in his stock is $10,000 the tax result is: a. Rapid has no gain, but Sylvester has ordinary income of $20,000. b. Rapid recognizes $30,000 of ordinary income and Sylvester has no gain or loss. c. Rapid recognizes $30,000 of ordinary income and Sylvester has a capital gain of $20,000. d. Rapid recognizes no gain and Sylvester recognizes a capital gain of $20,000 under Section 331. 43. Link, Inc. liquidated and distributed its only asset with a basis of $100,000 and a value of $250,000 to its only shareholder, Lincoln Adams, who has a basis of $50,000 for his stock. The tax consequences, in part, are as follows, if both parties are in the 30 percent tax bracket: a. Basis of property to shareholder: $200,000; combined tax liability: $105,000 b. Basis of property to shareholder: $250,000; combined tax liability: $91,500 c. Basis of property to shareholder: $150,000; combined tax liability: $90,000 d. Basis of property to shareholder: $200,000; combined tax liability: $120,000 44. The following statements about a liquidating distribution of depreciated assets to shareholders are all false, except: a. The liquidating corporation cannot recognize a loss on a liquidating distribution. b. A loss can be recognized on a subsidiary liquidating distribution to which Code Sec. 332 applies. c. The liquidating corporation cannot recognize a loss on a distribution to a shareholder who is a ?related taxpayer.? d. The general rule is that all losses are realized and recognized, subject to some exceptions. 45. The advantages of making a Code Sec. 338(h)(10) election include the following, except: a. Gains are recognized on the target?s assets. b. The seller does not recognize gain on the sale of stock. c. Appreciated assets receive a step-up in basis to fair market value. d. The subsidiary?s tax attributes remain with the consolidated selling group. 46. The following statements about property distributions in complete liquidations with liabilities in excess of fair market value are all false, except: a. A loss may be recognized. b. The shareholder receives a basis in the property equal to the amount of liability. c. The distributor recognizes gain equal to the excess of liabilities over basis. d. Since liabilities exceed fair market value, no depreciation recapture will occur. 47. Mark receives a liquidating distribution from Arosa Corporation as part of a redemption of all of its stock. Mark?s basis for his Arosa stock is $10,000. In exchange for his stock, Mark receives property with a $10,000 basis and a $25,000 fair market value that is subject to a $12,000 mortgage, and also receives cash of $15,000. What is Mark?s recognized gain? a. $42,000 b. $30,000 c. $18,000 d. $3,000 48. Which of the following statements regarding E&P of a liquidating corporation is incorrect? a. The character of an individual shareholder?s gain does not depend on the E&P of the liquidating corporation. b. The E&P of the liquidating corporation is not reduced by the amount distributed in liquidation. c. When a subsidiary is liquidated into its parent, the subsidiary?s E&P is extinguished. d. The process of liquidating may increase the E&P of the liquidating corporation. 49. Liquidations and stock redemptions that are treated as exchanges have many similar tax consequences to the corporation and its shareholders. These include the following, except: a. The corporation must recognize depreciation recapture. b. The corporation may recognize a loss on the distributed property. c. The shareholder receives a fair market value basis in the distributed property. d. E&P is either reduced or eliminated. 50. Paula receives a liquidating distribution from Pell Corporation as part of a redemption of all of its stock. Paula?s basis for her Pell stock is $10,000. In exchange for her stock, Paula receives property with an $8,000 basis and a $15,000 FMV that is subject to a $2,000 mortgage, and also receives cash of $5,000. What is Paula?s recognized gain? a. $12,000 b. $10,000 c. $8,000 d. $0 Can you answer all questions 1-50? What is the price?? When can you have it done by the earliest??,What ever you need.,Thank You for taking the time, I greatly appreciate it!!,Thank You!!
Question 4
Advanced Accounting - The Equity Method of Accounting for Investment. 1. During January 2010, Wells, Inc. acquired 30% of the outstanding common stock of Wilton Co. for $1,400,000. This investment gave Wells the ability to exercise significant influence over Wilton. Wilton's assets on that date were recorded at $6,400,000 with liabilities of $3,000,000. Any excess of cost over book value of Wells' investment was attributed to unrecorded patents having a remaining useful life of ten years. In 2010, Wilton reported net income of $600,000. For 2011, Wilton reported net income of $750,000. Dividends of $200,000 were paid in each of these two years. What was the reported balance of Wells' Investment in Wilson Co. at December 31, 2011? 2. On January 4, 2011, Watts Co. purchased 40,000 shares (40%) of the common stock of Adams Corp., paying $800,000. There was no goodwill or other cost allocation associated with the investment. Watts has significant influence over Adams. During 2011, Adams reported income of $200,000 and paid dividends of $80,000. On January 2, 2012, Watts sold 5,000 shares for $125,000. What was the balance in the investment account after the shares had been sold? 3. Tower Inc. owns 30% of Yale Co. and applies the equity method. During the current year, Tower bought inventory costing $66,000 and then sold it to Yale for $120,000. At year-end, only $24,000 of merchandise was still being held by Yale. What amount of intra-entity inventory profit must be deferred by Tower? 4. On January 1, 2011, Pacer Company paid $1,920,000 for 60,000 shares of Lennon Co.'s voting common stock which represents a 45% investment. No allocation to goodwill or other specific account was made. Significant influence over Lennon was achieved by this acquisition. Lennon distributed a dividend of $2.50 per share during 2011 and reported net income of $670,000. What was the balance in the Investment in Lennon Co. account found in the financial records of Pacer as of December 31, 2011? 5. On January 1, 2011, Bangle Company purchased 30% of the voting common stock of Sleat Corp. for $1,000,000. Any excess of cost over book value was assigned to goodwill. During 2011, Sleat paid dividends of $24,000 and reported a net loss of $140,000. What is the balance in the investment account on December 31, 2011?
