Balance Sheet and Net Income
On January 4, 2010, Harley, Inc. acquired 40% of the outstanding common stock of Bike Co. for $2,400,000. This investment gave Harley the ability to exercise significant influence over Bike. Bike's assets on that date were recorded at $10,500,000 with liabilities of $4,500,000. There were no other differences between book and fair values. During 2010, Bike reported net income of $500,000. For 2011, Bike reported net income of $800,000. Dividends of $300,000 were paid in each of these two years. 49. How much income did Harley report from Bike for 2010?
A. $120,000.
B. $200,000.
C. $300,000.
D. $320,000.
E. $500,000.
26. Under the equity method, when the company's share of cumulative losses equals its investment and the company has no obligation or intention to fund such additional losses, which of the following statements is true?
A. The investor should change to the fair-value method to account for its investment.
B. The investor should suspend applying the equity method until the investee reports income.
C. The investor should suspend applying the equity method and not record any equity in income of investee until its share of future profits is sufficient to recover losses that have not previously been recorded.
D. The cumulative losses should be reported as a prior period adjustment.
E. The investor should report these losses as extraordinary items.
7. What is the primary accounting difference between accounting for when the subsidiary is dissolved and when the subsidiary retains its incorporation?
A.If the subsidiary is dissolved, it will not be operated as a separate division
B.If the subsidiary is dissolved, assets and liabilities are consolidated at their book values
C. If the subsidiary retains its incorporation, there will be no goodwill associated with the acquisition
D.If the subsidiary retains its incorporation, assets and liabilities are consolidated at their book values
E.If the subsidiary retains its incorporation, the
26. Under the equity method, when the company's share of cumulative losses equals its investment and the company has no obligation or intention to fund such additional losses, which of the following statements is true?
A. The investor should change to the fair-value method to account for its investment.
B. The investor should suspend applying the equity method until the investee reports income.
C. The investor should suspend applying the equity method and not record any equity in income of investee until its share of future profits is sufficient to recover losses that have not previously been recorded.
D. The cumulative losses should be reported as a prior period adjustment.
E. The investor should report these losses as extraordinary items.
7. What is the primary accounting difference between accounting for when the subsidiary is dissolved and when the subsidiary retains its incorporation?
A.If the subsidiary is dissolved, it will not be operated as a separate division
B.If the subsidiary is dissolved, assets and liabilities are consolidated at their book values
C. If the subsidiary retains its incorporation, there will be no goodwill associated with the acquisition
D.If the subsidiary retains its incorporation, assets and liabilities are consolidated at their book values
E.If the subsidiary retains its incorporation, the