Solved >   Multiple Choice—CPA Adapted 111.On October 1, 2014,:1327317 …


Multiple Choice—CPA Adapted

111.On October 1, 2014, Wenn Company purchased 700 of the $1,000 face value, 8% bonds of Loy, Inc., for $819,000, including accrued interest of $14,000. The bonds, which mature on January 1, 2021, pay interest semiannually on January 1 and July 1. Wenn used the straight-line method of amortization and appropriately recorded the bonds as available-for-sale. On Wenn’s December 31, 2015 balance sheet, the carrying value of the bonds is

a.              $805,000.

b.              $798,000.

c.              $795,200.

d.              $784,000.

112.Valet Corporation began operations in 2015. An analysis of Valet’s equity securities portfolio acquired in 2015 shows the following totals at December 31, 2015 for trading and available-for-sale securities:

Trading              Available-for-Sale


Aggregate cost$90,000$110,000

Aggregate fair value80,00095,000

What amount should Valet report in its 2015 income statement for unrealized holding loss?

a.              $25,000.

b.              $5,000.

c.              $15,000.

d.              $10,000.

113.At December 31, 2015, Jeter Corporation had the following equity securities that were purchased during 2015, its first year of operation:


Cost                                        Value      Gain (Loss)

Trading Securities:

SecurityA$  85,000$  60,000$(25,000)

B    15,000    20,000     5,000

Totals$100,000$  80,000$(20,000)

Available-for-Sale Securities:

SecurityY$  70,000$  80,000$ 10,000

Z    85,000    55,000   (30,000)


All market declines are considered temporary. Fair value adjustments at December 31, 2015 should be established with a corresponding charge against

IncomeStockholders’ Equity

a.              $40,000$    0

b.              $25,000$30,000

c.              $20,000$20,000

d.              $20,000$    0

114.On December 29, 2015, James Company sold an equity security that had been purchased on January 4, 2014. James owned no other equity securities. An unrealized holding loss was reported in the 2014 income statement. A realized gain was reported in the 2015 income statement. Was the equity security classified as available-for-sale and did its 2014 market price decline exceed its 2015 market price recovery?

2014 Market Price

Decline Exceeded 2015

Available-for-Sale              Market Price Recovery





Use the following information for questions 115 through 117.

Rich, Inc. acquired 30% of Doane Corporation’s voting stock on January 1, 2014 for $800,000. During 2014, Doane earned $320,000 and paid dividends of $200,000. Rich’s 30% interest in Doane gives Rich the ability to exercise significant influence over Doane’s operating and financial policies. During 2015, Doane earned $400,000 and paid dividends of $120,000 on April 1 and $120,000 on October 1. On July 1, 2015, Rich sold half of its stock in Doane for $528,000 cash.

115.Before income taxes, what amount should Rich include in its 2014 income statement as a result of the investment?

a.              $320,000.

b.              $200,000.

c.              $96,000.

d.              $60,000.

116.The carrying amount of this investment in Rich’s December 31, 2014 balance sheet should be

a.              $800,000.

b.              $836,000.

c.              $896,000.

d.              $920,000.

117.What should be the gain on sale of this investment in Rich’s 2015 income statement?

a.              $128,000.

b.              $110,000.

c.              $98,000.

d.              $80,000.

118.On January 1, 2015, Reston Company purchased 25% of Ace Corporation’s common stock; no goodwill resulted from the purchase. Reston appropriately carries this investment at equity and the balance in Reston’s investment account was $1,120,000 at December 31, 2015. Ace reported net income of $700,000 for the year ended December 31, 2015, and paid common stock dividends totaling $280,000 during 2015. How much did Reston pay for its 25% interest in Ace?

a.              $1,015,000.

b.              $1,190,000.

c.              $1,225,000.

d.              $1,365,000.

119.On December 31, 2014, Patel Company purchased equity securities as trading securities. Pertinent data are as follows:

Fair Value

Security   Cost                               At 12/31/15




On December 31, 2015, Patel transferred its investment in security C from trading to available-for-sale because Patel intends to retain security C as a long-term investment. What total amount of gain or loss on its securities should be included in Patel’s income statement for the year ended December 31, 2015?

a.              $3,000 gain.

b.              $17,000 loss.

c.              $20,000 loss.

d.              $35,000 loss. is an online academic writing platform that provides extensive assistance to graduate school students as they work through their research projects, papers and dissertations. gives students access to experienced professionals who can provide the help they need in a timely and efficient manner. The service offers a wide range of services, including editing, proofreading, formatting, researching and more that can give students the confidence they need to write the perfect paper or dissertation for their chosen subject matter.

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