The receipt of cash dividends on an investment in common stock is accounted for

Question

The receipt of cash dividends on an investment in common stock is accounted for as a debit to Cash and a credit to Investment in Spacek Inc. Which of the following method is being used to account for the investment?

a. Market method
b. Cost method
c. Revenue method
d. Equity method        

Which one of the following ratios will provide profitability of a firm?

a. Average collection period
b. Inventory turnover
c. Return on sales      
d. Price-earnings ratio

69. A material loss should be presented separately as a component of income from continuing operations when it is

a. An extraordinary item
b. A cumulative effect type change in accounting method
c. Unusual in nature and infrequent in occurrence
d. Not unusual in nature but infrequent in occurrence  

70. Which one of the following is NOT a type of comparisons for evaluating financial ratios of a firm?

a. Time-series comparisons
b. Benchmarks
c. Cross-sectional comparisons
d. Segment comparisons

Explanation / Answer

67-a. Market method

68-d. Price-earnings ratio

69-a. An extraordinary item

70-b. Benchmarks

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