1. Which of the following is not a strategic purpose of a long-term investment in another company"s common stock?

A. expansion

B. integration

C. interest revenue

d. reduction of costs

2. An investment in bonds with a book value of $125,700 is sold for $132,000.

The gain or loss on the sale of the bond investments is:

A. loss of $6,300

B. gain of $6,300

C. loss of $125,700

D. gain of $132,000

3. An investor is assumed to have a degree of control of significant influence mover the investee when the investor owns what percentage of the outstanding common stock of the investee?

A. less than 20%

B. between 20% and 50%

C. between 51% and 80%

D. between 80% and 100%

4. When an investor owns between 20% and 50% of the outstanding common stock of the investee, the investor should account for its investment in the investee using the:

A. cost method

B. equity method

C. purchase method

D. investment method

5. Charmayne Corp. owns 40% of the outstanding common stock of Nichols Inc., which reported $300,000 net income and paid dividends of $120,000 during the year. The entry by Charmayne Corp. to record its share of the net income of the investee using the equity method is:

A. debit Cash, $48,000; credit Investment in Nichols Inc., $48,000

B. debit Investment in Nichols Inc., $120,000; credit Dividend Revenue,

$120,000

C. debit Investment in Nichols Inc., $120,000; credit Income of Nichols

Inc., $120,000

D. debit Investment in Nichols Inc., $300,000; credit Income of Nichols Inc., $300,000