On January 1, 2011, Nana Company paid $100,000 for 8,000 shares of Papa Company common stock. These securities were classified as trading...

On January 1, 2011, Nana Company paid $100,000 for 8,000 shares of Papa Company common stock. These securities were classified as trading securities. The ownership in Papa Company is 10%. Papa reported net income of $52,000 for the year ended December 31, 2011. The fair value of the Papa stock on that date was $45 per share. What amount will be reported in the balance sheet of Nana Company for the investment in Papa at December 31, 2011?A. $284,400B. $360,000C. $300,000D. $315,600If Ziggy Company concluded that an investment originally classified as held to maturity would now more appropriately be classified as available for sale, Ziggy wouldA. reclassify the investment as available for sale and immediately recognize in accumulated other comprehensive income any unrealized gain or loss on the reclassification date.B. need to restate earnings, as the original classification was in error.C. not reclassify the investment, as original classifications are irrevocable.D. reclassify the investment as available for sale and immediately recognize in net income any unrealized gain or loss on the reclassification date.On June 1, 2011, Dirty Harry Co. borrowed cash by issuing a 6-month noninterest-bearing note with a maturity value of $500,000 and a discount rate of 6%. What is the carrying value of the note as of September 30, 2011?A. $300,000.B. $475,000.C. $525,000.D. $495,000.Knique Shoes issued a $100,000, 8-month, noninterest-bearing note. The loan was made by Second Commercial Bank whose stated discount rate is 9%. The effective interest rate on this loan (rounded) isA. 9.50%.B. 9.49%.C. 9.28%.D. 9.57%.A loss contingency should be accrued in a company’s financial statements only if the likelihood that a liability has been incurred isA. reasonably possible and the amount of the loss is known.B. reasonably possible and the amount of the loss can be reasonably estimated.C. at least remotely possible and the amount of the loss is known.D. probable and the amount of the loss can be reasonably estimated.Hope Company bought 30% of Faith Corporation in 2011. Hope’s purchase price equaled 30% of the book value of Faith’s net identifiable assets, which also equaled 30% of the fair value of Faith. During 2011, Faith reported net income in the amount of $4,000,000 and declared and paid dividends in the amount of $500,000. Hope mistakenly accounted for the investment as available for sale instead of using the equity method. What effect would this error have on the investment account and net income, respectively, for 2011?A. Understated by $1,200,000; overstated by $1,050,000B. Understated by $1,050,000; understated by $1,050,000C. Overstated by $1,200,000; overstated by $1,200,000D. Overstated by $1,050,000; understated by $1,050,000Bloomfield Bakers accounts for its investment in Clor Confectionary under the equity method. Bloomfield carried the Clor investment at $150,000 and $165,000 at December 31 of 2010 and 2011, respectively. During 2011 Clor recognized $80,000 of net income and paid dividends of $30,000. Assuming that Bloomfield owned the same percentage of Clor throughout 2011, their percentage ownership must have beenA. 50%.B. 5%.C. 18.75%.D. 30%Which of the following situations would not require that long-term liabilities be reported as current liabilities on a classified balance sheet?A. The long-term debt matures within the upcoming year.B. The creditor has the right to demand payment due to a contractual violation.C. All of these situations require the current classification.D. The long-term debt is callable by the creditor.On January 1, 2011, Green Corporation purchased 20% of the outstanding voting common stock of Gold Company for $300,000. The book value of the acquired shares was $275,000. The excess of cost over book value is attributable to an intangible asset on Gold’s books that was undervalued and had a remaining useful life of five years. For the year ended December 31, 2011, Gold reported net income of $125,000 and paid cash dividends of $25,000. What is the carrying value of Green’s investment in Gold at December 31, 2011?A. $315,000B. $295,000C. $320,000D. $300,000Hawk Corporation purchased 10,000 shares of Diamond Corporation stock in 2008 for $50 per share and classified the investment as securities available for sale. Diamond's market value was $60 per share on December 31, 2009 and $65 on December 31, 2010. During 2011, Hawk sold all of its Diamond stock at $70 per share. In its 2011 income statement, Hawk would report a gain ofA. $150,000.B. $50,000.C. $200,000.D. $300,000.Smith buys and sells securities which it typically classifies as available for sale. On December 15, 2011, Smith purchased $500,000 of Jones shares, and elected the fair value option to account for the Jones investment. As of December 31, 2011, the Jones shares had a fair value of $525,000. In the 2011 financial statements, Smith will show (ignore taxes)A. other comprehensive income of $25,000.B. investment income of $25,000 in its income statement.C. accumulated other comprehensive income of $525,000.D. an investment in Jones of $500,000.If Dinsburry Company concluded that an investment originally classified as a trading security would now more appropriately be classified as held to maturity, Dinsburry wouldA. reclassify the investment as held to maturity and immediately recognize in net income all unrealized gains and losses as of the reclassification date.B. reclassify the investment as held to maturity, but there would be no income effect.C. reclassify the investment as held to maturity and treat the fair value as of the date of reclassification as the investment’s amortized cost basis for future amortization.D. not reclassify the investment, as original classifications are irrevocable.B Corp. has an employee benefit plan for compensated absences that gives employees 10 paid vacation days and 10 paid sick days. Both vacation and sick days can be carried over indefinitely. Employees can elect to receive payment in lieu of vacation days; however, no payment is given for sick days not taken. At December 31, 2011, B’s unadjusted balance of liability for compensated absences was $42,000. B estimated that there were 300 vacation days and 150 sick days available at December 31, 2011. B’s employees earn an average of $200 per day. In its December 31, 2011, balance sheet, what amount of liability for compensated absences is B required to report?A. $60,000B. $144,000C. $90,000D. $84,000Jack Corporation purchased a 20% interest in Jill Corporation for $1,500,000 on January 1, 2011. Jack can significantly influence Jill. On December 10, 2011, Jill declared and paid $1 million in dividends. Jill reported a net loss of $6 million for the year. What amount of loss should Jack report in its income statement for 2011 relative to its investment in Jill?A. $1,400,000B. $1,200,000C. $1 000,000D. $1,500,000On January 1, 2011, G Corporation agreed to grant its employees two weeks vacation each year, with the stipulation that vacations earned each year can be taken the following year. For the year ended December 31, 2011, G’s employees each earned an average of $800 per week. 500 vacation weeks earned in 2011 were not taken during 2011. Wage rates for employees rose by an average of 5 percent by the time vacations actually were taken in 2012. What is the amount of G’s 2012 wages expense related to 2011 vacation time?A. $400,000B. $420,000C. $20,000D. $0Clark’s Chemical Company received customer deposits on returnable containers in the amount of $100,000 during 2011. Twelve percent of the containers weren’t returned. The deposits are based on the container cost marked up 20%. What is cost of goods sold relative to this forfeiture?A. $10,000B. $14,400C. $2,000D. $0Which of the following is not true about the fair value option?A. The fair value option must be elected for all shares of an investment in a particular company.B. Electing the fair value option for held-to-maturity investments simply reclassifies those investments as trading securities.C. The fair value option is irrevocable.D. All of these statements are true.On January 2, 2010, Howdy Doody Corporation purchased 12% of Ranger Corporation's common stock for $50,000 and classified the investment as available for sale. Ranger’s net income for the years ended December 31, 2010 and 2011, were $10,000 and $50,000, respectively. During 2011, Ranger declared and paid a dividend of $60,000. There were no dividends in 2010. On December 31, 2010, the fair value of the Ranger stock owned by Howdy Doody had increased to $70,000. How much should Howdy Doody show in the 2011 income statement as income from this investment? A. $26,000B. $7,200C. $20,000D. $27,200