Exam 15: Specimen Financial Statements: Pepsico, Inc

If a company buys the stocks of companies in a related industry, they are most likely investing because they

Buford Industries owns 40% of Appalachian Company. For the current year, Appalachian reports net income of $250,000 and declares and pays a $70,000 cash dividend. Which of the following correctly presents the journal entries to record Buford's equity in Appalachian net income and the receipt of dividends from Appalachian?

An unrealized gain or loss on trading securities is reported as a separate component of stockholders' equity.

Under the equity method of accounting for investments in common stock, when a dividend is received from the investee company

Which of the following would not be classified as a short-term investment?

On January 1, 2017, Chic Corp. paid $750,000 for 100,000 shares of Toto Company's common stock, which represents 25% of Toto's outstanding common stock. Toto reported income of $300,000 and paid cash dividends of $80,000 during 2017 Chic should report the investment in Toto Company on its December 31, 2017, balance sheet at

For available-for-sale securities, the unrealized gain or loss account is carried forward to future periods.

When a year-end adjustment is made to reduce the trading debt securities portfolio to market, what effect, if any, will the adjustment have on the balance sheet and the income statement?

When a company invests for speculative purposes, the investment is mostly in the______________ of other corporations.

The Fair Value Adjustment account

Assume that Oslo Corp. acquires 30% of Celdon Corp. for $360,000 on January 1, 2017. If Celdon declares and pays $120,000 in total dividends on February 14th, the journal entry would include a credit to

Under the cost method, dividends received from an investee company are credited to the _______________ account, whereas under the equity method, dividends received from an investee company are credited to the _______________ account.

At the end of its first year, the equity securities portfolio consisted of the following investments. The unrealized loss to be recognized under the fair value method is

When a company holds stock of several different corporations, the group of securities is identified as a(n)

If a company acquires a 40% common stock interest in another company

An investment in short-term equity securities should be charged to a nominal account since the investment is temporary.

Trading securities are reported on the balance sheet at

Outer Banks Corporation sells 300 shares of common stock being held as an investment. The shares were acquired six months ago at a cost of $40 a share. Outer Banks sold the shares for $43 a share. The entry to record the sale is

Porter Brothers Company purchased a debt investment for $80,000 on January 1, 2017. On January 1, 2018, Porter received cash interest of $4,000. Which of the following correctly presents the journal entries for the purchase and the receipt of interest?

High Country Stables, Inc., operates several dog-racing tracks throughout the United States. Since most facilities are outdoor tracks only, most of the cash receipts for High Country are received from April through October. These funds are usually invested in temporary, very liquid investments, such as stocks and bonds. Among the stocks purchased last year, was Vendable, Inc. a company specializing in automatic vending equipment. The company decided not to sell its Vendable stock at the end of last year, and has purchased more of the stock this year. The company intends to continue to purchase stock until it holds enough to make a takeover bid for the company. The accountants have been instructed to continue to classify the investment as short-term until the takeover is accomplished, so that less attention will be directed to it. (Presently, High Country has no long-term investment in stock at all.) Required: 1. Is it ethical for High Country to attempt to take over another company? Explain. 2. Is it ethical for High Country to leave its investment in the short-term investment category? Explain.