ACCT 551 Week 7 Quiz

ACCT 551 - Intermediate Accounting II (DeVry)

1. Patton Company purchased $400,000 of 10% bonds of Scott Co. on January 1, 2011, paying $376,100. The bonds mature January 1, 2021; interest is payable each July 1 and January 1. The discount of $23,900 provides an effective yield of 11%. Patton Company uses the effective-interest method and plans to hold these bonds to maturity.
For the year ended December 31, 2011, Patton Company should report interest revenue from the Scott Co. bonds of (Points : 4)
2. (TCO B) On October 1, 2010, Menke Co. purchased (to hold to maturity) 200, $1,000, 9% bonds for $208,000. An additional $6,000 was paid for accrued interest. Interest is paid semiannually on December 1 and June 1, and the bonds mature on December 1, 2014. Menke uses straight-line amortization. Ignoring income taxes, the amount reported in Menke's 2010 income statement from this investment should be (Points : 4)
3. (TCO B) On its December 31, 2010 balance sheet, Calhoun Company appropriately reported a $10,000 debit balance in its Securities Fair Value Adjustment (Available-for-Sale) account. There was no change during 2011 in the composition of Calhoun's portfolio of marketable equity securities held as available-for-sale securities. The following information pertains to that portfolio:.....................
What amount of unrealized loss on these securities should be included in Calhoun's stockholders' equity section of the balance sheet at December 31, 2011? (Points : 4)
4. (TCO B) On December 29, 2011, James Co. sold an equity security that had been purchased on January 4, 2010. James owned no other equity securities. An unrealized holding loss was reported in the 2010 income statement. A realized gain was reported in the 2011 income statement. Was the equity security classified as available for sale, and did its 2010 market price decline exceed its 2011 market price recovery?
5. (TCO B) Rich, Inc. acquired 30% of Doane Corp.'s voting stock on January 1, 2010 for $400,000. During 2010, Doane earned $160,000 and paid dividends of $100,000. Rich's 30% interest in Doane gives Rich the ability to exercise significant influence over Doane's operating and financial policies. During 2011, Doane earned $200,000 and paid dividends of $60,000 on April 1 and $60,000 on October 1. On July 1, 2011, Rich sold half of its stock in Doane for $264,000 cash. What should be the gain on sale of this investment in Rich's 2011 income statement? (Points : 4)