81.Kennett Corporation purchased 25,000 shares of common stock of the Swenson Corporation for $40 per share on January 2, 2008. Swenson Corporation had 100,000 shares of common stock outstanding during 2008, paid cash dividends of $60,000 during 2008, and reported net income of $200,000 for 2008.  Kennett Corporation should report revenue from investment for 2008 in the amount of a. $15,000.

b.$35,000.

c.$50,000.

d.$55,000.

Use the following information for questions 82 and 83.

Garrison Co. owns 20,000 of the 50,000 outstanding shares of Steele, Inc. common stock.  During 2008, Steele earns $800,000 and pays cash dividends of $640,000.

82.If the beginning balance in the investment account was $500,000, the balance at December 31, 2008 should be a. $820,000.

b.$660,000.

c.$564,000.

d.$500,000.

83.Garrison  should report investment revenue for 2008 of

a.$320,000.

b.$256,000.

c.$64,000.

d.$0.

Use the following information for questions 84 through 87.

The summarized balance sheets of Elston Company and Alley Company as of December 31, 2007 are as follows:

Elston Company

Balance Sheet

December 31, 2007

Assets

 

 

$1,200,000

Liabilities

 

$   150,000

Capital stock

 

600,000

Retained earnings

 

450,000

Total equities

Alley Company

Balance Sheet

December 31, 2007

$1,200,000

Assets

 

 

$900,000

Liabilities

 

$225,000

Capital stock

 

555,000

Retained earnings

 

120,000

Total equities

 

$900,000

 

84.If Elston Company acquired a 20% interest in Alley Company on December 31, 2007 for $195,000 and the fair value method of accounting for the investment were used, the amount of the debit to Investment in Alley Company Stock would have been a. $135,000.

b.$111,000.

c.$195,000.

d.$180,000.

85.If Elston Company acquired a 30% interest in Alley Company on December 31, 2007 for $225,000 and the equity method of accounting for the investment were used, the amount of the debit to Investment in Alley Company Stock would have been a. $285,000.

b.$225,000.

c.$180,000.

d.$202,500.

86.If Elston Company acquired a 20% interest in Alley Company on December 31, 2006 for $135,000 and during 2008 Alley Company had net income of $75,000 and paid a cash dividend of $30,000, applying the fair value method would give a debit balance in the Investment in Alley Company Stock account at the end of 2008 of a. $111,000.

b.$135,000.

c.$150,000.

d.$144,000.

87.If Elston Company acquired a 30% interest in Alley Company on December 31, 2007 for $202,500 and during 2008 Alley Company had net income of $75,000 and paid a cash dividend of $30,000, applying the equity method would give a debit balance in the Investment in Alley Company Stock account at the end of 2008 of a. $202,500.

b.$216,000.

c.$225,000.

d.$217,500.

Use the following information for questions 88 and 89.

Karter Company purchased 200 of the 1,000 outstanding shares of Flynn Company's common stock for $300,000 on January 2, 2007. During 2007, Flynn Company declared dividends of $50,000 and reported earnings for the year of $200,000.

88.If Karter Company used the fair value method of accounting for its investment in Flynn Company, its Investment in Flynn Company account on December 31, 2007 should be a. $290,000.

b.$330,000.

c.$300,000.

d.$340,000.

89.If Karter Company uses the equity method of accounting for its investment in Flynn Company, its Investment in Flynn Company account at December 31, 2007 should be a. $290,000.

b.$300,000.

c.$330,000.

d.$340,000.

Use the following information for questions 90 and 91.

Barry Corporation earns $240,000 and pays cash dividends of $80,000 during 2007. Glenon Corporation owns 3,000 of the 10,000 outstanding shares of Barry.

90.What amount should Glenon show in the investment account at December 31, 2007 if the beginning of the year balance in the account was $320,000? a. $392,000.

b.$320,000.

c.$368,000.

d.$480,000.

 

 

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