Question

37/ Madison Corporation purchased 40% of Jay Corporation for $400,000 on January 1. On June 20 of the same year, Jay Corporation declared total cash dividends of $100,000. At year-end, Jay Corporation reported net income of $500,000. The balance in Madison Corporation's Long-Term Investment-Jay Corporation account as of December 31 should be:

Multiple Choice

$640,000.

$240,000.

$740,000.

$400,000.

$560,000.

38/Segmental Manufacturing owns 30% of Glesson Corp. stock. Glesson pays a total of $51,500 in cash dividends for the period. Segmental's entry to record the dividend transaction would include a:

Multiple Choice

Credit to Cash for $15,450.

Credit to Investment Revenue for $51,500.

Credit to Long-Term Investments for $15,450.

Debit to Cash for $51,500.

Debit to Long-Term Investments for $15,450.

39/ If the exchange rate for Canadian and U.S. dollars is 0.83777 to 1, this implies that 4 Canadian dollars will buy ____ worth of U.S. dollars. (Select the nearest answer.)

Multiple Choice

$0.20944

$0.83777

$1.83777

$3.35108

None of these.

40/ A company had net income of $41,000, net sales of $310,000, and average total assets of $210,000. Its profit margin and total asset turnover were respectively:

Multiple Choice

2.02%; 1.48.

13.23%; 1.48.

13.23%; 0.20.

1.48%; 13.23.

1.48%; 0.20.

Answer 1

Answer 37.) Madison Corporation's Long-Term Investment-Jay Corporation account as of December 31 should be: $560,000

Description		Amount in $
Investment in Jay Corporation		400,000
Add: Share of Madison Corporation in net income of Jay corporation	500,000*40%	200,000
Less: Share of Madison Corporation in dividend of Jay corporation	100,000*40%	40,000
Madison Corporation’s Long term Investment – Jay Corporation		560,000

Answer 38.) Segmental's entry to record the dividend transaction would include:

Credit to long-term investment $15,450

Description		Amount in $
Glesson Dividend		51,500
Segmental Manufacturing share in Glesson dividend	51,500*30%	15,450

* When one company having significance influence over the other company then the dividend declared by the subsidiary company will reduce the amount of investment amount of parent’s company from the share that parent have in the subsidiary dividend, entry will be as below:

Dividend	15,450
Long term Investment		15,450

Answer 39.) If the exchange rate for Canadian and U.S. dollars is 0.83777 to 1, this implies that 4 Canadian dollars will buy ____ worth of U.S. dollars.

$3.35108

Working:

Exchange rate for Canadian and U.S. dollars 0.83777 to 1

Then 4 Canadian dollars = 0.83777 * 4 U.S. dollars

4 Canadian dollars = 3.35108 U.S. dollars

Answer 40.) A company had net income of $41,000, net sales of $310,000, and average total assets of $210,000. Its profit margin and total asset turnover were respectively:

13.23%; 1.48

Working:

Profit Margin = (Net Income/Net sales)*100

= (41,000/310,000)*100

=13.23%

Total Assets Turnover = (Net Sales/Average total assets)

= 310,000/210,000

= 1.48