Question

5) Orange and Blue forned a partnership and share profits 3:1. Their S80,000 and S70,000, respectively. If Gold purchases 25% of their capital interests directly from Orange and Blue for 560,000, and goodwill is recorded before the amount of goodwill recognized in this transaction? currernt capital belances are A) $37,500 B) $30,000 C) $60,000 D) $90,000 E) $240,000 If a company uses the equity method to account for its investment in subsidiaries that it holds significant influence over, how does the investor company account investee to the investor? for dividends paid by the A) A credit to "Investment in Subsidiary B) A credit to "Earnings in Equity Investee" C) A credit to "Retained Earmings" D) A credit to "Cash E) A credit to "Dividend Income" 7) A subsidiary of a US based company operates in the European Union as it's functional currency. What process statements to US GAAP? must be followed to convert the subsidiaries financial A) Temporal method, with the foreign currency B) Temporal method, with the foreign currency translation adjustment impacting net income accumulated other comprehensive income C) Current method, D) Current method, with the forei with the foreign currency translation adjustment impacting net income gn currency translation adjustment impacting accumulated other comprehensive income E) None of the above 8) Adam, Bryan, and Carrie have a partnership that is going through liquidation procedures. If Bryan is insolvent, is Bryan eligible to receive (1) safe payments and/or (2) gain or loss allocations from the sale of assets? A) Safe payments = Yes / GainLoss Allocations-Yes B) Safe payments Yes | Gain/Loss Allocations No C) Safe payments No Gain/Loss Allocations No D) Safe payments No | Gain/Loss Allocations Yes

Answer 1

5	Gold's share in capital	60000
	Gold's share in total	25%
	Total capital	240000	(60000/25%)
	Gold's capital	-60000
	Orange's capital	-80000
	Blue's capital	-70000
	Goodwill	30000
	So correct answer is B
6	In the equity method when holding company have significant influence then it is treated as part of holding
	So it will be treated as retained earnings
	So correct answer is C