Chapter 2 Test Bank Partnerships: Organization and operation (Complete And Verified Study material) (24pages) LEARNEXAMS

Multiple Choice Questions LO1 1 LO1 When a Eagle Company has less than 50% of the voting stock of Fish Corporationwhich of the following applies? a. Only the fair value method b. Only the equity method c. Either the fair value method or the equity method d. Neither the fair value method or the equity method 2 LO2 Which one of the following items, originally recorded in the Investment in FalconCo. account under the equity method, would not be systematically charged to income onaperiodic basis? a. amortization expense of goodwill b. depreciation expense on the excess fair value attributed to machinery c. amortization expense on the excess fair value attributed to lease agreements d. interest expense on the excess fair value attributed to long-termbonds payable3 Which one of the following statements is correct for an investor company? a. Once the balance in the Investment in Osprey Co. account reaches zero, it will not be reduced any further. b. Under the equity method, the balance in the Investment in Osprey Co. account can be negative if the investee corporation operates at a loss. c. Under the cost method, the balance in the Investment in Osprey Co. account canbe negative if the investee corporation operates at a loss. d. Under the equity method, any goodwill inherent or contained in the Investment in Osprey Co. account will be amortized to the income earned fromthe investee.