1) An investor purchased 500 shares of common stock, $25 par, for $21,750. Subsequently, 100 shares were sold for $40.50 per share. What is the amount of gain or loss on the sale?
a. $4,050 gain
b. $300 gain
c. $1,550 gain
d. $300 loss
2) Blanton Corporation purchased 35% of the outstanding shares of common stock of Worton Corporation as a long-term investment. Subsequently, Worton Corporation reported net income and declared and paid cash dividends. What journal entry would Blanton Corporation use to record the dividends it receives from Worton Corporation?
a. debit Investment in Worton Corporation; credit Cash
b. debit Investment in Worton Corporation; credit Income of Worton Corporation
c. debit Cash; credit Investment in Worton Corporation
d. debit Cash; credit Dividend Revenue
3) Consulting the persons affected by a budget when it is prepared can provide an effective means of motivation and cooperation.
a. true
b. false
4) Wendell Company owns 28% of the common stock of Porter Company and accounts for the investment using the equity method. Assuming that Wendell Company purchased the stock several years ago, the balance in the investment account would be equal to the cost of the
a. investment plus the total amount of dividends Wendell has received from Porter since the investment was purchased
b. investment only
c. investment plus Wendell's share of Porter's net income earned since the investment was purchased
d. investment plus Wendell's share of Porter's net income earned since the investment was purchased minus the total amount of dividends Wendell has received from Porter since the investment was purchased
5) Blanton Corporation purchased 12% of the outstanding shares of common stock of Worton Corporation as a long-term investment. Subsequently, Worton Corporation reported net income and declared and paid cash dividends. What journal entry would Blanton Corporation use to record the dividends it receives?
a. debit Cash; credit Investment in Worton Corporation
b. debit Investment in Worton Corporation; credit Income of Worton Corporation
c. debit Cash; credit Dividend Revenue
d. debit Investment in Worton Corporation; credit Cash