Exam 15: Investments

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?

Long-term investments:

The equity method with consolidation is used to account for long-term investments in equity securities with controlling influence.

A company reported net income of $225,000,net sales of $2,500,000,and average total assets of $2,100,000 for the current year.Calculate this company's profit margin,total asset turnover,and return on total assets.

On May 1 of the current year,a company paid $200,000 to purchase 7%,10-year bonds with a par value of $200,000; interest is paid semiannually on May 1 and November 1.The company intends to hold the bonds until they mature.Prepare the journal entries to record (1)the bond purchase,(2)the receipt of the first semiannual interest payment on November 1 of the current year,(3)the accrual of interest for year-end December 31,and (4)the receipt of the second semiannual payment on May 1.

A company had net income of $86,000 in Year 1 and $118,000 in Year 2.Its net sales were $640,000 in Year 1 and $611,000 in Year 2.Its average total assets in Year 1 were $1,670,000 and $1,712,000 in Year 2.Calculate the profit margin,total asset turnover and return on total assets for both years.Comment on the results.

Other comprehensive income includes unrealized gains and losses on available-for-sale securities.

On April 1 of the current year,a company paid $150,000 cash to purchase 7%,10-year bonds with a par value of $150,000; interest is paid semiannually each April 1 and October 1.The company intends to hold these bonds until they mature.Prepare the journal entries to record the bond purchase,the receipt of the first semiannual interest payment on October 1 of the current year,and the accrual of interest for the year-end December 31.

A company has net income of $130,500.Its net sales were $1,740,000 and its average total assets were $2,750,000.Its total asset turnover equals 4.7%.

Long-term investments are reported in the:

On May 1,Jorge Co.purchases Radiotech bonds for $25,000.This investment is considered to be an available-for-sale investment.This is the company's first and only investment in available-for-sale securities.On July 31 (Jorge's year-end),the bonds had a market value of $28,000.Jorge should record a credit to Unrealized Gain−Equity for $3,000.

If a company owns more than 20% of the stock of another company and the stock is being held as a long-term investment,which method would the investor normally use to account for this investment?

Return on total assets can be separated into the profit margin ratio and total asset turnover.

A company paid $37,800 plus a broker's fee of $525 to acquire 8% bonds with a $40,000 maturity value.The company intends to hold the bonds to maturity.The cash proceeds the company will receive when the bonds mature equal:

Explain how equity securities having significant influence are accounted for and reported in the financial statements.Include a discussion of the criterion for these securities in terms of an investee's voting stock.

When using the equity method,receipt of cash dividends increases the carrying (book)value of an investment in equity securities.

Comprehensive income includes all except:

All of the following are true about debt securities except:

Stock investments with insignificant influence are classified as short- or long-term based on managers' intent and the stock's marketability.

Long-term investments include: