Exam 15: Investments and International Operations

A company reported net income of $100,000 and average total assets of $425,000. Calculate its return on total assets.

A company had net income of $76,000 in 2012 and $88,000 in 2013. Its net sales were $640,000 in 2012 and $611,000 in 2013. Its average total assets in 2012 were $670,000 and $712,000 in 2013. Calculate the profit margin, total asset turnover, and return on total assets for both years. Comment on the results.

Foreign exchange rates fluctuate due to changing _______________ and ___________ conditions.

Texana Inc. imports inventory from Mexico. Prepare the journal entries for Texana to record the following transactions. Include any year-end adjustments.

What is comprehensive income and how is it usually reported in the financial statements?

On January 4, 2011, Larsen Company purchased 5,000 shares of Warner Company for $59,500 plus a broker's fee of $1,000. Warner Company has a total of 25,000 shares of common stock outstanding and it is presumed the Larsen Company will have a significant influence over Warner. During each of the next two years, Warner declared and paid cash dividends of $0.85 per share. Its net income was $72,000 and $67,000 for 2011 and 2012, respectively. The January 12, 2013, entry to record the sale of 3,000 shares of Warner Company stock for $39,000 cash should be:

Trading securities are securities that are purchased by trading other securities rather than by paying cash.

Trading securities, held-to-maturity debt securities, and equity securities giving an investor significant influence over an investee are always considered short-term investments.

Long-term investments are usually held as an investment of cash for the use of current operations.

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 upon the maturity of the bond is:

Brown Company sold supplies in the amount of 15,000 euros to a French company when the exchange rate was $1.15 per euro. At the time of payment, the exchange rate decreased to $1.12. Brown must record a loss of $450.

Held-to-maturity securities are ____________ securities a company intends and is able to hold until maturity.

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

Haladam Company had the following transactions relating to investments in trading securities during the year. Prepare the required general journal entries for these transactions.

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

Any unrealized gain or loss on available-for-sale securities is reported on the income statement in the other gain or loss section.

Investments in equity securities where the investor has a significant, but not controlling, influence are accounted for using the _______________ method.

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