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Question 16
Park Co. uses the equity method to account for its January 1,
2004, purchase of Tun Inc.'s common stock. On January 1,
2004, the fair values of Tun's FIFO inventory and land
exceeded their carrying amounts. How do these excesses of fair
values over carrying amounts affect Park's reported equity in
Tun's 2004 earnings?
Question 17
On July 1, 2005, Pell Co. purchased Green Corp. ten-year, 8%
bonds with a face amount of $500,000 for $420,000. The bonds
mature on June 30, 2013 and pay interest semi-annually on
June 30 and December 31. Pell has the intent and ability to
hold the bonds until maturity. Using the interest method, Pell
recorded bond discount amortization of $1,800 for the six
months ended December 31, 2005. For this held-to-maturity
investment, Pell should report 2005 revenue of
Question 18
Jersey, Inc. is a retailer of home appliances and offers a service
contract on each appliance sold. Jersey sells appliances on
installment contracts, but all service contracts must be paid in
full at the time of sale. Collections received for service
contracts should be recorded as an increase in a
Question 19
On January 1, 2005, Mega Corp. acquired 10% of the
outstanding voting stock of Penny, Inc.On January 2, 2006,
Mega gained the ability to exercise significant influence over