Question

Circle the letter of the best response 1. Which of the features does not describe short-term investments? A. They are recorded at cost when purchased B. Management usually intends to sell these within one year C. Stock dividends are recorded in a memorandum entry in the general journal. D. They are reported at cost on the balance sheet 2. On August 15, Prism Corporation purchased 100 shares of Western Inc. for $52,000, the shares are considered a short-term investment for Prism Corporation. Western Inc. paid Prism Corporation $4,000 in dividends on December 1. At year end, the shares have a market value of $65,000. The year end balance sheet will report a Short-term Investments value of: A. $52,000 B. $56,000 C. $65,000 D. $69,000 3. Which one of these statements related to consolidations is truei Total assets of a consolidated entity are the parent company's total assets plus each subsidiary company's total assets when a corporation owns more than 50% of another company's shares, the parent company must report consolidated financial statements for the period. Non-controlling interest is usually reported as an asset on a consolidated balance sheet Once the consolidated financial statements have been prepared, it is no longer necessary for the subsidiary company to maintain a separate set of books. A. B. C. D. 4. Danny Corporation purchased 25% of the voting shares of Cora Inc. for S80,000. The puchne allowed Danny Corporation to exercise significant influence over Cora Inc's operations current year, Cora Inc. reported net income of $100,000 while Danny Corporation reported net income of $10,000. Which entry would Danny Corporation make related to this investment? A. Investment in Cora Inc. Common Shares B. Cash C. Investment in Cora Inc. Common Shares D. Investment in Cora Inc. Common Shares Equity-Method Investment Revenue Equity Method Investment Revenue Dividend Revenue Equity-Method Investment Revenue 25,000 100,000 20,000 10,000 25,000 100,000 20,000 10,000 5. A strong Canadian dollar discourages which of the following? A. Travel to Canada by foreigners B. Purchase of foreign goods by Canadians C. Canadians to travel abroad D. Canadians to save dollars

Answer 1

Dear Student,

As per the HomeworkLib policy only first four questions should be answered. kindly take note of it.

1. answer is option C

For stock dividends, the proper journal entry is recorded in the general journal. For stock-split, memorandum entry is required. Journal entry for stock dividend is as follows:

Dr. Retained earnings

Cr. Common stock distributable

2. answer is option A

On the balance sheet, the short-term investments are reported at cost. The use of market value is done to recognize gain or loss on the sale. Therefore, short-term investments will be reported at $52000.

3. answer is option A

Total assets of a consolidated assets = parent company’s assets + subsidiary company’s assets.

4. answer is option A

The net income of subsidiary is considered as the investment of parent company. The proportion of investment will be equal to the proportion of parent company’s voting right in subsidiary i.e. 25%. And the amount of investment will be 25000 (100000*25%).