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From advanced accounting, 13th edition, by Beams, Anthony, Betinghaus, & Smith. ...

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Accounting

From advanced accounting, 13th edition, by Beams, Anthony, Betinghaus, & Smith.
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Weebill Corporation bought 80% of Tree Company's common stock with a book value of $800,000 on January 2, 2005 for $700,000. The law firm of Dewey, Cheatam and Howe did $25,000 to facilitate the purchase. At what amount should Weebill's Investment in Tree account be reported on January 2, 2005? a. $640,000 b. $665,000. c. $700,000 d. $725,000 A parent corporation owns 55% of the outstanding voting common stock of one domestic subsidiary, but does not control the subsidiary because it is in bankruptcy. Which of the following statements is correct? a. The parent corporation must still prepare consolidated financial statements for the economic entity b. The parent corporation must stop using the equity method of accounting for the subsidiary and start using the cost method. c. The parent company may continue to use the equity method but the subsidiary cannot be consolidated d. The parent company would suspend the operation of the Investment account until notified by the bankruptcy court that the subsidiary has emerged from bankruptcy

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