91. Under the equity method of accounting for long-term investments in ordinary shares, when a dividend is received from the investee company,
a.the Dividend Revenue account is credited.
b.the Share Investments account is increased.
c.the Share Investments account is decreased.
d.no entry is necessary.
92. On January 1, 2014, Daley Corporation purchased 30% of the ordinary shares outstanding of King Corporation for $500,000. During 2014, King Corporation reported net income of $200,000 and paid cash dividends of $100,000. The balance of the Share Investments—King account on the books of Daley Corporation at December 31, 2014 is
a.$500,000.
b.$530,000.
c.$560,000.
d.$470,000.
93. Under the equity method, the Share Investments account is increased when the
a.investee company reports net income.
b.investee company pays a dividend.
c.investee company reports a loss.
d.share investment is sold at a gain.
94. Revenue is recognized when cash dividends are received under
a.the controlling interest method.
b.the cost method.
c.the equity method.
d.both the cost and equity methods.
95. Which of the following is the correct matching concerning an investor's influence on the operations and financial affairs of an investee?
% of Investor OwnershipPresumed Influence
a.Less than 20%Short-term
b.Between 20%-50%Significant
c.More than 50%Long-term
d.Between 20%-50%Controlling
96. Which of the following is the correct matching concerning the appropriate accounting for long-term share investments?
% of Investor OwnershipAccounting Guidelines
a.Less than 20%Cost method
b.Between 20%–50%Cost method
c.More than 50%Cost or equity method
d.Between 20%–50%Consolidated financial statements
97. If the cost method is used to account for a long-term investment in ordinary shares,
a.it is presumed that the investor has significant influence on the investee.
b.the earning of net income by the investee is considered a proper basis for recognition of income by the investor.
c.net income of the investee is not considered earned by the investor until dividends are declared by the investee.
d.the Investment account may be, at times, greater than the acquisition cost.
98. If a company acquires a 40% ordinary share interest in another company,
a.the equity method is usually applicable.
b.all influence is classified as controlling.
c.the cost method is usually applicable.
d.the ability to exert significant influence over the activities of the investee does not exist.
99. If an ordinary share investment is sold at a gain, the gain
a.is reported as operating revenue.
b.is reported under a special section, "Discontinued investments," on the income statement.
c.is reported in the Other income and expense section of the income statement.
d.contributes to gross profit on the income statement.
100.If the equity method is being used, cash dividends received
a.are credited to Dividend Revenue.
b.require no entry because investee net income has already been recorded at the proper proportion on the investor's books.
c.are credited to the Share Investments account.
d.are credited to the Revenue from Share Investments account.