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Exam 15: Investments

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Question 111

Multiple Choice

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At the end of the accounting period,the owners of debt securities:

A) Must report the dividend income accrued on the debt securities.
B) Must retire the debt.
C) Must record a gain or loss on the interest income earned.
D) Must record a gain or loss on the dividend income earned.
E) Must record any interest earned on the debt securities during the period.

F) A) and D)
G) C) and D)

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Question 112

Multiple Choice

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Madison Corporation purchased 40% of Jay Corporation for $125,000 on January 1.On June 20 of the same year,Jay Corporation declared total cash dividends of $30,000.At year-end,Jay Corporation reported net income of $150,000.The balance in Madison Corporation's Long-Term Investment-Jay Corporation account as of December 31 should be:

A) $77,000.
B) $125,000.
C) $173,000.
D) $197,000.
E) $370,000.

F) A) and B)
G) B) and C)

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Question 113

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Foreign exchange rates fluctuate due to changing ________ and ________ conditions.

The price of one currency stated in terms of another currency is called a foreign exchange rate.

On February 15,Jewel Company buys 7,000 shares of Marcelo Corp.common stock at $28.53 per share plus a brokerage fee of $400.The stock is classified as available-for-sale securities.This is the company's first and only investment in available-for-sale securities.On March 15,Marcelo Corp.declares a dividend of $1.15 per share payable to stockholders of record on April 15.Jewel Company received the dividend on April 15 and ultimately sells half of the Marcelo Corp.stock on November 17 of the current year for $29.30 per share less a brokerage fee of $250.The balance in the investment account on April 16 is:

On June 18,Wyman Company (a U.S.Company) sold merchandise to the Nielsen Company of Denmark for €60,000 (Euros) ,with a payment due in 60 days.If the exchange rate was $1.35 per euro on the date of sale and $1.14 per euro on the date of payment,Wyman Company should recognize a foreign exchange gain or loss in the amount of:

All of the following are true about debt securities except:

An investor presumed to have significant influence owns at least 20% but not more than 50% of another company's voting stock.

Security prices are sometimes listed in fractions.For example,a debt security with a price of 22¾ is the same as $22.25.

Identify the classifications for non-influential investments in securities.What are the accounting basics for non-influential investments in securities,including acquisition,dividends earned,and disposition?

A company reported net sales of $850,000,net income of $200,000 and average total assets of $575,000.Calculate its return on total assets.

On February 15,Jewel Company buys 7,000 shares of Marcelo Corp.common at $28.53 per share plus a brokerage fee of $400.The stock is classified as available-for-sale securities.This is the company's first and only investment in available-for-sale securities.On March 15,Marcelo Corp.declares a dividend of $1.15 per share payable to stockholders of record on April 15.Jewel Company received the dividend on April 15 and ultimately sells half of the Marcelo Corp.stock on November 17 of the current year for $29.30 per share less a brokerage fee of $250.The fair value of the remaining 3,500 shares is $29.50 per share.The amount that Jewel Company should report in the asset section of its year-end December 31 balance sheet for its investment in Marcelo Corp.is:

The controlling investor is called the:

A company had net income of $40,000,net sales of $300,000,and average total assets of $200,000.Its profit margin and total asset turnover were respectively:

Bharrat Corporation purchased 40% of Ferris Corporation for $100,000 on January 1.On October 17 of the same year,Ferris Corporation declared total cash dividends of $12,000.At year-end,Ferris Corporation reported net income of $60,000.The balance in the Bharrat Corporation's Long-Term Investment-Ferris account at December 31 should be:

Multinational corporations can be U.S.companies with operations in other countries.

All of the following statements regarding other comprehensive income are true except:

Equity securities reflect a creditor relationship such as investments in notes,bonds,and certificates of deposit.

A decrease in the fair value of a security that has not yet been realized through an actual sale of the security is called a(n) :

On January 1,2014,Rickson Corporation purchased 7,500 shares of AutoTech as a long-term investment for a total of $235,000.The 7,500 shares represent 30% of the outstanding (25,000)shares of AutoTech.Prepare the journal entries for Rickson to record the following transactions and events: $\begin{array}{|l|l|}\hline\text { December } 31,2014: & \text { AutoTech rep orted net income of } \$ 66,000 \text { for } 2014 . \\\hline \text { February } 1,2015: & \text { Sold } 1,875 \text { of the AutoTech shares for } \$ 34 \text { per share. In addition, } \\\hline & \$ 1,350 \text { in fees and commissions were paid by Rickson on this sale. } \\\hline\text { November } 1,2015: & \text { Rickson received a } \$ 0.90 \text { per share cash dividend from AutoTech. } \\\hline \text { December } 31,2015: & \text { AutoTech reported net loss of } \$ 46,000 \text { for } 2015\\\hline\end{array}$