Question

Question 5 (1 point)

Passive investments (<20% ownership) are generally shown at their fair market value on the Balance Sheet.

A: True

B: False

Question 6 (1 point)

On 1/1/20, Tyler Trading Corp. purchases 1,000 shares of Elly Energy common stock for $25 per share. Elly Energy has 20,000,000 total shares of common stock outstanding. On 12/31/20, the Elly shares are trading at $30 per share. Tyler Trading will record the following journal entry to reflect the 2020 unrealized gain/loss:

A: Dr. Unrealized loss 5,000 and Cr. Investment 5,000

B: Dr. Investment 5,000 and Cr. Unrealized Gain 5,000

C: Dr. Unrealized gain 5,000 and Cr. Investment 5,000

D: Dr. investment 5,000 and Cr. Unrealized Loss 5,000

Question 7 (1 point)

For Passive (<20% ownership) investments, dividends received from the investee company will result in the following journal entry:

A: Dr. Dividend Revenue and Cr. Cash

B: Dr. Investment and Cr. Dividend Revenue

C: Dr. Cash and Cr. Investment

D: Dr. Cash and Cr. Dividend Revenue

Question 8 (1 point)

On 1/1/20, Hershey Corporation purchases 20,000 of the 60,000 outstanding shares of CC Confectioneer for $40 per share. During 2020, CC Confectioneer reports net income of $600,000 and pays total dividends to common shareholders of $300,000. Hershey's 12/31/20 Balance Sheet will show $______ for the Investment account.

A: $900,000

B: $1,000,000

C: $800,000

D: $1,100,000

Answer 1

Q-5	Equity Investment which are less than 20% are accounted using fair value . So this statement is True.
	Correct answer is option A ( i.e. True).

Q-6	Account Titles	Debit $	Credit $
	Investment	5,000
	Unrealized gain		5,000
	(30 - 25 ) x 1,000
	Correct answer is option B.
Q-7	Account Titles	Debit $	Credit $
	Cash	XXXX
	Dividend revenue		XXXX
	Correct answer is option D.
Q-8	% Holding	33.3333%	=20000/60000
	Investment at cost	800,000	= 20000*40
	Add: Share of Net income	200,000	=600000*33.3333%
	Less: Dividend	-100,000	=300000*33.3333%
	12/31/20 Investment Account	$ 900,000
	Correct answer is option A.