Question

Stock Inv Stock Investments Loss on Sale of Stock Investments Cash.. . d. 25% of the common stock of an investee company is purchased as a long-term investment, the appropriate method of accounting for the investment is a. the cost method. b. the equity method. C. the preparation of consolidated financial statements. d. determined by agreement with whomever owns the remaining 90% of the stock, 6) On January 1, 2020, Jamestina Corp. paid $1,800,000 for 100,000 shares of Belinda Company's common stock, which represents 25% of Belinda's outstanding common stock. Belinda reported net income of $1,200,000 and paid cash dividends of $600,000 during 2020. Jamestina Corp should report the investment in Belinda Company on its 7) December 31, 2020, balance sheet at: a. $1,800,000 b. $1,758,000 c. $1,818,000 d. $1,950,000 8) Bonda Corporation's trading portfolio at the end of the year is as follows: Security Common Stock CSS Common Stock AAD Fair Value $112,000 15.000 $127.000 Cost $110,000 19,000 $129.000 At the end of the year, Bonda Corporation should a. set up a Fair Value Adjustment account for Stock AAD. b. set up a Fair Value Adjustment account for the portfolio. C. recognize an Unrealized Loss-Income for $2,000. d. report a loss on the income statement for $4,000 under "Other expenses and losses." (a stocks. At the end of its first year, the trading securities portfolio consisted of the following common Fair Value $ 150,000 158,000 176.400 $484,400 Cost $146,500 165,000 180,000 $491.500 Pow Corporation Bun Inc. Ghost Corporation The unrealized loss to be recognized under the fair value method is

Answer 1

6) If 25% of the common stock of an investee company is purchased as a long term investment, the appropriate method of accounting for investment would be the equity method because the equity method of accounting is used when the investment results in 20% to 50% stake.

so the correct option is (b) Equity method