On January 1, 2014, Jude Corporation purchases stock in Gelco Company. Jude Corporation owns 1% of the outstanding stock of Gelco Company. Jude Corporation intends to hold the stock for longer than one year. How should Jude Corporation classify this stock?
A.trading security
B.held-to-maturity investment in bonds
C.equity-method investment
D.investment in available-for-sale securities
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On January 1, 2014, a company purchased long-term available-for-sale securities in one company. The cost was $100,000 and the investor owns 5% of the outstanding common stock of the investee. The investor does not use an allowance account to adjust the investment. At December 31, 2014, the fair value of the investment is $97,000. What journal entry is needed on December 31, 2014?
A.debit Unrealized Loss on Investment in Available-for-Sale Securities for $3,000 and credit Investment in Available-for-Sale Securities for $3,000
B.debit Investment in Available-for-Sale Securities for $2,000 and credit Unrealized Gain on Investment in Available-for-Sale Securities for $2,000
C.debit Investment in Available-for-Sale Securities for $5,000 and credit Unrealized Gain on Investment in Available-for-Sale Securities for $5,000
D.debit Investment in Available-for-Sale Securities for $3,000 and credit Unrealized Gain on Investment in Available-for-Sale Securities for $3,000
When an investor owns between 20% and 50% of the outstanding stock of another company, the ________ method is used to account for the stock investment.
A.fair value
B.equity
C.consolidated
D.available-for-sale
Wolverine Corporation owns 29% of Buckeye Corporation. Net income for Buckeye for the year is $250,000. The journal entry prepared by Wolverine Corporation is:
A.debit Equity-Method Investment for $72,500 and credit Cash for $72,500.
B.debit Equity-Method Investment for $72,500 and credit Equity-Method Investment Revenue for $72,500.
C.debit Cash for $72,500 and credit Equity-Method Investment for $72,500.
D.debit Equity-Method Investment for $250,000 and credit Equity-Method Investment Revenue for $250,000.
Under the equity method of accounting for long-term investments in common stock, when a cash dividend is received from the investee company:
A.the investor's Equity-Method Investment account is increased.
B.the Dividend Revenue account is increased.
C.the investor's Equity-Method Investment account is decreased.
D.no entry is necessary.
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