Exam 15: Investments and International Operations

Investments in debt and equity securities that the company actively manages and trades for profit are referred to as short-term investments in:

As a long-term investment, Elmer's Equipment Enterprise purchased 20% of Sticky Supplies Inc.'s 300,000 shares for $350,000 at the beginning of the fiscal year of both companies. On the purchase date, the fair value and book value of Sticky's net assets were equal. During the year, Sticky's earned net income of $430,000 and distributed cash dividends of 0.42 cents per share. The fair value of Sticky's assets at the end of the year totaled $349,450. What is Elmer's balance for this investment at the end of the year, assuming there is no significant control?

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

Mian, Inc., sells American gourmet foods to merchandisers in Singapore. Prepare the journal entries for Mian to record the following transactions. Include any year-end adjustments.

Equity securities are:

On April 1 of the current year, a company paid $150,000 to purchase 7%, 10-year bonds that had a par value of $150,000 and paid interest semiannually on October 1 and April 1. The company intends to hold the bonds until they mature. Prepare the journal entry to recognize accrued interest as of December 31 of the current year.

Investments in trading securities are always classified as ______________ and are reported as _______________ on the balance sheet.

A company should report its portfolio of trading securities at its market value.

Vans purchased 40,000 shares of Skechers common stock for $232,000. This represents 40% of the outstanding stock. The entry to record the transaction includes a:

If a long-term investment in an equity security gives the investor significant influence over the investee, the investment is classified as available-for-sale.

A long-term investment is recorded at cost when purchased.

Consolidated financial statements:

To prepare consolidated financial statements when a company has an international subsidiary, the international subsidiary's financial statements must be translated into U.S. dollars.

On November 12, Kendra, Inc., a U.S. Company, sold merchandise on credit to Nakakura Company of Japan at a price of 1,500,000 yen. The exchange rate was $0.00837 per yen on the date of sale. On December 31, when Kendra prepared its financial statements, the exchange rate was $0.00843. Nakakura Company paid in full on January 12, when the exchange rate was $0.00861. On December 31, Kendra should prepare the following journal entry for this transaction:

Long-term investments in held-to-maturity debt securities are accounted for using the:

A company received dividends of $0.35 per share on 300 shares of stock. The journal entry to record this transaction would be to debit Cash for $105 and credit Dividend Revenue for $105.

Available-for-sale debt securities are:

If a U.S. company makes a credit sale to a foreign company, the sales price must be translated into dollars as of the date of _____________.

A U.S. company makes a sale to a foreign customer payable in 30 days in the customer's currency. The sale would be recorded by the U.S. company on the date:

A company's return on total assets equals 28%. If total assets and net sales are $4,500,000 and $10,000,000 respectively, how much is net income?