Question 1

A credit balance in retained profits:

Accepted Answer

A)  equals the balance of cash available for dividends. 
B)  indicates that a profit was earned in the last financial period. 
C)  represents the profits earned and not paid out in dividends. 
D)  indicates that a loss was earned in the last financial period. 
A)  equals the balance of cash available for dividends. 
B)  indicates that a profit was earned in the last financial period. 
C)  represents the profits earned and not paid out in dividends. 
D)  indicates that a loss was earned in the last financial period.

Question 2

XYZ buys a 24 per cent share in ABC for $80m. ABC's total net profit is $50m and it pays $4m in dividends to XYZ. Using the equity method, the revenue recognised for this investment during the year would be:

Accepted Answer

A)  $4m. 
B)  $12m. 
C)  $50m. 
D)  $0. 
A)  $4m. 
B)  $12m. 
C)  $50m. 
D)  $0.

Question 3

XYZ buys a 24 per cent share in ABC for $80m. ABC's total net profit is $50m and it pays $4m in dividends to XYZ. Using the cost method, what would be the revenue and investment amounts at year-end for this investment?

Accepted Answer

A)  $4m and $80m 
B)  $4m and $84m 
C)  $12m and $80m 
D)  $12m and $92m 
A)  $4m and $80m 
B)  $4m and $84m 
C)  $12m and $80m 
D)  $12m and $92m

Question 4

Which of the following statements about the equity method is NOT true?

Accepted Answer

A)  The investment asset is valued at cost on acquisition. 
B)  The investment asset is increased for the investing company's share of the investee company's profit. 
C)  When the investee company pays a dividend, the investing company credits dividend revenue. 
D)  The investment asset is decreased for the investing company's share of the investee company's loss. 
A)  The investment asset is valued at cost on acquisition. 
B)  The investment asset is increased for the investing company's share of the investee company's profit. 
C)  When the investee company pays a dividend, the investing company credits dividend revenue. 
D)  The investment asset is decreased for the investing company's share of the investee company's loss.

A credit balance in retained profits:

XYZ buys a 24 per cent share in ABC for $80m. ABC's total net profit is $50m and it pays $4m in dividends to XYZ. Using the equity method, the revenue recognised for this investment during the year would be:

XYZ buys a 24 per cent share in ABC for $80m. ABC's total net profit is $50m and it pays $4m in dividends to XYZ. Using the cost method, what would be the revenue and investment amounts at year-end for this investment?

Which of the following statements about the equity method is NOT true?

Introduction to Financial Accounting

Measuring and Evaluating Financial Position and Financial Performance

The Double-Entry System

Record-Keeping

Accrual Accounting Adjustments

Financial Reporting Principles, Accounting Standards and Auditing

Internal Control and Cash

Accounts Receivable and Further Record-Keeping

Inventory

Noncurrent Assets

Liabilities

Revenue and Expense Recognition: Additional Concepts

The Statement of Cash Flows

Financial Statement Analysis

Accounting Policy Choices

Sustainability Reporting

Filters

Exam 12: Completing the Balance Sheet

A credit balance in retained profits:

XYZ buys a 24 per cent share in ABC for $80m. ABC's total net profit is $50m and it pays $4m in dividends to XYZ. Using the equity method, the revenue recognised for this investment during the year would be:

XYZ buys a 24 per cent share in ABC for $80m. ABC's total net profit is $50m and it pays $4m in dividends to XYZ. Using the cost method, what would be the revenue and investment amounts at year-end for this investment?

Which of the following statements about the equity method is NOT true?

Introduction to Financial Accounting

Measuring and Evaluating Financial Position and Financial Performance

The Double-Entry System

Record-Keeping

Accrual Accounting Adjustments

Financial Reporting Principles, Accounting Standards and Auditing

Internal Control and Cash

Accounts Receivable and Further Record-Keeping

Inventory

Noncurrent Assets

Liabilities

Revenue and Expense Recognition: Additional Concepts

The Statement of Cash Flows

Financial Statement Analysis

Accounting Policy Choices

Sustainability Reporting

Filters