Determine which answer is most correct and circle the corresponding letter.
1) Webber Company owns 28% of the common stock of Patten Company and account for the investment using the equity method. Assuming that Webber Company purchased the stock several years ago, the balance in the investment account would be equal to the cost of the
b. investment plus Webber's share of Patten's net income earned since the investment was purchased
c. investment plus the total amount of dividends Webber has received from Patten since the investment was purchased
d. investment plus Webber's share of Patten's net income earned since the investment was purchased minus the total amount of dividends Webber has received from Patten since the investment was purchased
2) Bonds that are subject to retirement at a stated dollar amount prior to maturity at the option of the issuer are called
b. callable bonds.
c. early retirement bonds.
3) Mega Sales sells some used store fixtures. The acquisition cost of the fixtures is $12,500, the accumulated depreciation on these fixtures is $9,750 at the time of sale. The fixtures are sold for $3,000. The value of this transaction in the Investing section of the statement of cash flows is:
4) X and Y have original investments of $50,000 and $100,000 respectively in a partnership. The articles of partnership include the following provisions regarding the division of net income: interest on original investment at 10%, salary allowances of $27,000 and $18,000 respectively, and the remainder equally. How much of the net income of $90,000 is allocated to Y?
5) What is the total stockholders' equity based on the following data?
Common Stock $800,000
Excess of Issue Price Over Par 375,000
Retained Earnings (deficit) 50,000
6)An investor purchased 500 shares of common stock, $25 par, for $21,750. Subsequently, 100 shares were sold for $49.50 per share. What is the amount of gain or loss on the sale?
a. $12,750 gain
b. $600 gain
c. $600 loss
d. $9,250 loss
7) Bonds Payable has a balance of $1,000,000 and Premium on Bonds Payable has a balance of $8,000. If the issuing corporation redeems the bonds at 101, what is the amount of gain or loss on redemption?
a. $2,000 loss
b. $2,000 gain
c. $8,000 loss
d. $8,000 gain
8) The net income reported on the income statement for the current year was $275,000. Depreciation recorded on fixed assets and amortization of patents for the year were $40,000 and $9,000, respectively. Balances of current asset and current liability accounts at the end and at the beginning of the year are as
End / Beginning
Cash $ 50,000 / $ 60,000
Accounts receivable 112,000 / 108,000
Inventories 105,000 / 93,000
Prepaid expenses 4,500 /6,500
Accounts payable (merchandise creditors) 75,000 /89,000
What is the amount of cash flows from operating activities reported on the statement of cash flows prepared by the indirect method?
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