会计英语选择题

1．A company acquired 30% of B Company’s voting stock for $200 000 on January 2,2004. A’s 30% interest in B gave A the ability to exercise significant influence over B’s operating and financial policies. During 2004, B earned $ 70 000 and paid dividends of $50 000. B reported earnings of $150 000 for the six months ending June 30, 2005, and $200 000 for the year ending December 31, 2005.on July 1, 2005, A sold half of its stock in B for $140 000 cash. B paid dividends of $60 000 on October 1, 2005.

Use the above information to answer the following three questions:

①Before income taxes , what amount should A include in its 2004 income statement as a result

of the investment ?

A. $15 000

B. $21 000

C. $36 000

D. $80 000

②In A’s December 31, 2004 Balance Sheet, what should be the carrying amount of this

investment?

A. $200 000

B. $206 000

C. $221 000

D. $236 000

③On its 2005 income statement ,what amount should A report as a gain or loss from the sale of

half of its investment?

A. $22 000 gain

B. $23 500 gain

C. $500 loss

D. $14 500 gain

2. On May 1, 2005, ABC purchased 30% of the stock of D Corporation for $600 000. During 2005,

D had net income of $100 000. On February 1 and on August 1, D paid $30 000 in dividends. On December 31,2005, the market price of the stock is $630 000. what amount should be shown in the Investment in D Corporation account on ABC’s Balance Sheet dated December 31, 2005?

A. $621 000

B. $611 000

C. $629 000

D. $630 000

3.When the fair value of investments in debt securities exceeds their carrying amounts, held-to-Maturity securities and available-for-sale securities should be reported at the end of the year at _____

Held-to-maturity securities available-for-sale securities

A. Fair value Amortized Cost

B. Amortized cost Fair value

C. Amortized cost Amortized cost

D. Fair value Fair value

4.When an investor uses the equity method to account for investments in common stock, the investment account will be increased when the investor recognizes

A. a proportionate interest in the net income of the investee.

B. a cash dividend received from the investee.

C. periodic amortization of the goodwill related to the purchase.

D. depreciation related to the excess of market value over book value of the investee’s depreciable assets at the date of purchase by the investor.

5. When a company holds between 20%and 50% of the outstanding stock of an investee, which of the following statements applies?

A. The investor should always use the equity method to account for its investment.

B. The investor should use the equity method to account for its investment unless circumstances indicate that it is unable to exercise “significant influence” over the investee.

C. The investor must use the fair value method unless it can clearly demonstrate the ability to exercise “significant influence” over the investee.

D. The investor should always use the fair value method to account for its investment.