Accounting

CHAPTER 1

SOLUTIONS TO MULTIPLE CHOICE QUESTIONS, EXERCISES AND PROBLEMS

MULTIPLE CHOICE QUESTIONS

1. c

$180,000 - $160,000 = $20,000

$125,000 - $100,000 = 25,000

Total gain $45,000

2. a

$29,000 - $26,000 = $3,000

3. a

$207,544 – [(6% x $200,000) – (4% x $207,544)] = $203,846

4. c

AOCI, beginning balance $ 4,000 credit

Reclassification of unrealized loss on AFS securities sold 1,000 credit

Unrealized gain on AFS securities held at year-end (1) 6,000 credit

AOCI, ending balance $11,000 credit

(1) $81,000 – ($100,000 - $25,000) = $6,000 unrealized gain

5. d

$5,000,000 + 40% x ($600,000 - $200,000) = $5,160,000

6. b

7. b

Reported net income 35% x $7,000,000 = $ 2,450,000

Less unconfirmed profit on ending inventory

35% x [$6,000,000 – ($6,000,000/1.25)] = (420,000)

Equity in net income for 2014 $ 2,030,000

Less dividends 35% x $2,000,000 (700,000)

Plus beginning investment balance 50,000,000

Ending investment balance $51,330,000

8. d

Fizzy’s entry to record the acquisition is:

|Current assets | |25,000 | |

|Property | |2,500,000 | |

|Goodwill | |25,475,000 | |

| |Liabilities | |3,000,000 |

| |Cash | |25,000,000 |

9. b

10. a

EXERCISES

E1.1 Investment in Trading Securities

(in millions)

a. $209 + 3 = $212

b. Unrealized gains and losses on...