Question Details

Stock of Investee Company and Investee Company reports


1.	If Investor Company owns 20% of the stock of Investee Company and Investee Company reports profits of $100,000, then Investor Company reports equity income of:
a.	$80,000
b.	$20,000
c.	$40,000
d.	$60,000
e.	none of the answers are correct



2.	Which of the following items on the income statement is not disclosed net of tax?
a.	unusual or infrequent item disclosed separately
b.	discontinued operations
c.	extraordinary loss
d.	cumulative effect of change in accounting principle
e.	unusual or infrequent item disclosed separately and discontinued operations are both not disclosed net of tax



	3.	Which of the following will be disclosed in the reconciliation of retained earnings?
a.	adjustment for an error of a prior period
b.	net income
c.	net loss
d.	dividends
e.	all of the answers are correct




	4.	Fisher Company has 1,000,000 share of common stock with a par value of $10. Additional paid-in capital totals $10,000,000 and retained earnings is $12,000,000. The directors declare a 6% stock dividend when the market value is $5. The reduction of retained earnings as a result of the declaration will be:
a.	$0
b.	$300,000
c.	$600,000
d.	$500,000
e.	none of the answers are correct




	5.	Which of the following would be classified as an extraordinary item on the income statement?
a.	loss on disposal of a segment of business
b.	cumulative effect of a change in accounting principle
c.	a sale of land
d.	an error correction that relates to a prior year
e.	a loss from a flood in a location that would not be expected to flood








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