Multiple Choice Questions 1. Gaw Company owns 15% of the common stock of Trace Corporation and used the fair-value method to account for this investment. Trace reported net income of $110‚000 for 2011 and paid dividends of $60‚000 on October 1‚ 2011. How much income should Gaw recognize on this investment in 2011? A. $16‚500. B. $9‚000. C. $25‚500. D. $7‚500. E. $50‚000. 2. Yaro Company owns 30% of the common stock of Dew Co. and uses the equity method to account for the investment
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proposals included (1) a public announcement that Avon would explore plans to divest two of its businesses‚ probably at a considerable book loss; (2) a reduction of the dividend on Avon’s common stock; and (3) an exchange offer under which Avon would issue an unusual preferred stock in exchange for up to 25% of its common shares. Background Avon Products‚ Inc.‚ founded in 1886‚ was one of the world’s largest manufacturers and marketers of beauty products. The company was famous for its direct selling
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operations in electrical equipment‚ tools metals‚ and rubber products‚ also sought to acquire Nicholson. By 1967‚ H.K. Porter Company had purchased 44‚000 of Nicholson’s 584‚000 shares of stock outstanding. In March 1972‚ Porter informed Nicholson’s management of their plan to purchase a majority of Nicholson’s stock‚ or 437‚000 shares‚ at $42 per share. Cooper‚ upon hearing the news‚ offered to help Nicholson. Shortly after‚ Cooper withdrew their offer to help since the risks were too high that Porter
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Chapter 02 Reporting Intercorporate Interests Multiple Choice Questions On January 1‚ 2007‚ Rotor Corporation acquired 30 percent of Stator Company ’s stock for $150‚000. On the acquisition date‚ Stator reported net assets of $450‚000 valued at historical cost and $500‚000 stated at fair value. The difference was due to the increased value of buildings with a remaining life of 15 years. During 2007 and 2008 Stator reported net income of $25‚000 and $15‚000 and paid dividends of $10
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Gaw Company owns 15% of the common stock of Trace Corporation and used the fair-value method to account for this investment. Trace reported net income of $110‚000 for 2011 and paid dividends of $60‚000 on October 1‚ 2011. How much income should Gaw recognize on this investment in 2011? Choose one answer. a. $9‚000. b. $16‚500. c. $7‚500. d. $50‚000. e. $25‚500. Correct Marks for this submission: 1/1. Question 2 Marks: 1 An upstream sale of inventory is
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Stocks 1. Stocks Name Instructor XACC / 291 Date Stocks 2. Stocks shares known as “preferred”‚ because in the event of the company being liquidation‚ the preferred stock shares will receive dividends‚ and business assets before the common shares (Crook‚ 2000). If the company does not have enough money to pay both the preferred shares‚ and the common shares‚ the preferred shareholder must receive his shares first. Many different
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Cost of goods sold B. Property‚ plant‚ & equipment C. Patents D. Goodwill E. Bonds payable 4. A company should always use the equity method to account for an investment if A. it has the ability to exercise significant influence over the operating policies of the investee. B. it owns 30% of another company’s stock. C. it has a controlling interest (more than 50%) of another company’s stock. D. the investment was made primarily to earn a return on excess cash. E. it does not have the ability to exercise
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great taste. * Julia Day hired people with experience in finance‚ marketing and production. The group started to develop product samples of the new frozen baby food. * Julia decided that each investment should be in blocks of $30‚000. In addition‚ to become an eligible investor‚ one should have an annual income of at least $40‚000 and net worth of $100‚000. Definition of the Problem: The case presents six (6) independent questions requiring investment-related recommendations based on specific
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model to estimate a stock ’svalue even if itsgrowth rate is never expected to become constant.d. If a stock has a required rate of return rs = 12%‚ and if its dividend isexpected to grow at aconstant rate of 5%‚ this implies that the stock’s dividend yield is also 5%.e. The price of a stock is the present value of all expected future dividends‚discounted at thedividend growth rate.2. Stocks A and B have the following data. Assuming the stock market is efficientand the stocks are in equilibrium‚ which
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75 million of stock at a $76 million pre-money valuation (“Series E Preferred”). The proposed stock instrument was a participating convertible stock (“PCPT”). This instrument functions the same as the convertible preferred stock in the event of a qualified public offering whereas in the event of a sale‚ RSC and TCV consortium not only receives the face value of the consideration‚ but also gets the equity participation. CellTech offered Metapath’s shareholders to receive common stock at closing in
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