the equity method of accounting for long-term investments 1. When an investor owns between 20% and 50% of the common stock of a corporation, it is generally presumed that the investor a. has insignificant influence on the investee and that the cost method should be used to account for the investment. b. should apply the cost method in accounting for the investment. c. will prepare consolidated financial statements. d. has significant influence on the investee and that the equity method should be used to account for the investment. 2. Under the equity method of accounting for long-term investments in common stock, when a dividend is received from the investee company, a. the Dividend Revenue account is credited. b. the Stock Investments account is increased. c. the Stock Investments account is decreased. d. no entry is necessary. 3. On January 1, 2013, Dart Corporation purchased 30% of the common stock outstanding of Run Corporation for $700,000. During 2013, Run Corporation reported net income of $200,000 and paid cash dividends of $100,000. The balance of the Stock Investmentsâ€”Run account on the books of Dart Corporation at December 31, 2013 is a. $700,000. b. $730,000. c. $760,000. d. $670,000. 4. Under the equity method, the Stock Investments account is increased when the a. investee company reports net income. b. investee company pays a dividend. c. investee company reports a loss. d. stock investment is sold at a gain. 5. The account, Stock Investments, is a. a subsidiary ledger account. b. a long-term liability account. c. a general ledger control account. d. another name for Debt Investments. Business Management Assignment Help, Business Management Homework help, Business Management Study Help, Business Management Course Help
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