REFERENCE: Ref.01_15 Cayman Inc.bought 30% of Maya Company on January 1,2008 for 1,2008

question 96

Multiple Choice

REFERENCE: Ref.01_15
Cayman Inc.bought 30% of Maya Company on January 1,2008 for $450,000.The equity method of accounting was used.The book value and fair value of the net assets of Maya on that date were $1,500,000.Maya began supplying inventory to Cayman as follows:
Maya reported net income of $100,000 in 2008 and $120,000 in 2009 while paying $40,000 in dividends each year.
-Which of the following results in an increase in the investment account when applying the equity method?

• A)Unrealized gain on intercompany inventory transfers for the prior year.
• B)Unrealized gain on intercompany inventory transfers for the current year.
• C)Dividends paid by the investor.
• D)Dividends paid by the investee.
• E)Sale of a portion of the investment during the current year.

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Definitions:

A-B Problem

A theoretical issue in psychology addressing the consistency between attitudes (A) and behaviors (B) in individuals.

Attitudes and Behaviors

The relationship between individuals' mental stances or feelings toward something and their actions.

Implicit and Explicit Attitudes

Implicit attitudes are subconscious beliefs or feelings, while explicit attitudes are consciously held beliefs or opinions.

Evaluation of Information

The process of critically analyzing and assessing data or facts to determine their validity, relevance, and reliability.