Rick asked:


1.An investor purchased 500 shares of common stock, $25 par, for $21,750. Subsequently, 100 shares were sold for $49.50 per share. What is the amount of gain or loss on the sale?
a.$12,750 gain
b.$600 gain
c.$600 loss
d.$9,250 loss

2.When shares of stock held as an investment are sold, the difference between the proceeds and the carrying amount of the investment is recorded as a(n)
a.prior period adjustment
b.extraordinary gain or loss
c.paid-in capital addition
d.gain or loss

3.Blanton Corporation purchased 17% 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 dividends from Worton Corporation?
a.debit Investment in Worton Corporation; credit Cash
b.debit Cash; credit Dividend Revenue
c.debit Investment in Worton Corporation; credit Income of Worton Corporation
d.debit Cash; credit Investment in Worton Corporation

4.An investor purchased 500 shares of common stock, $25 par, for $21,750. Subsequently, 100 shares were sold for $47.50 per share. What is the amount of gain or loss on the sale?
a.$4,350 gain
b.$400 gain
c.$400 loss
d.$16,800 loss

5.On January 1, 2010, Blanton Company’s Valuation Allowance for Trading Investments account has a debit balance of $22,500. On December 31, 2010, the cost of the trading securities portfolio was $80,000. The fair value was $98,000. Which of the following would Blanton report?
a.an Unrealized Loss on Trading Investments of $4,500.
b.an Unrealized Gain on Trading Investments of $4,500.
c.an Unrealized Gain on Trading Investments of $18,000.
d.an Unrealized Loss on Trading Investments of $18,000.

6.On April 1, 2010, Stanton Company purchased $50,000 of Harris Company’s 12% bonds at 100 plus accrued interest of $2,000. On June 30, 2010, Stanton received its first semiannual interest. On February 1, 2011, Stanton sold $40,000 of the bonds at 103 plus accrued interest. The journal entry Stanton will record on April 1, 2010, will include:
a.a credit to Interest Payable for $2,000.
b.a debit to Investments - Harris Company for $52,000.
c.a credit for Cash of $50,000.
d.a debit to Investments - Harris Company for $50,000.

Link to Blog: Valuations