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Chapter 01
The Equity Method of Accounting for Investments
Multiple Choice Questions
1. Gaw Company owns 15% of the common stock of Trace Corporation and used the fair-value
method to account for this investment. Trace reported net income of $110,000 for 2013 and
paid dividends of $60,000 on October 1, 2013. How much income should Gaw recognize on
this investment in 2013?
A. $16,500.
B. $9,000.
C. $25,500.
D. $7,500.
E. $50,000.
2. Yaro Company owns 30% of the common stock of Dew Co. and uses the equity method to
account for the investment. During 2013, Dew reported income of $250,000 and paid
dividends of $80,000. There is no amortization associated with the investment. During 2013,
how much income should Yaro recognize related to this investment?
A. $24,000.
B. $75,000.
C. $99,000
Advanced Accounting 12e Joe Hoyle Thomas SchaeferTimothy Doupnik All Chapters, Original , Answers At The End Of Each Chapter Complete And Study material 2951pages LEARNEXAMS
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