Exam 15: Specimen Financial Statements: Pepsico, Inc

Crespo Company purchased 42,000 shares of common stock of the Paive Corporation as an investment for $1,000,000. During the year, Paive Corporation reported net income of $400,000 and paid dividends of $100,000. Instructions (a) Assuming that the 42,000 shares represent a 15% interest in Paive Corporation: 1. Prepare the journal entry to record the investment in Paive stock. 2. Prepare any entries that Crespo Company should make in accounting for its investment in Paive stock during the year. 3. What is the balance of the Stock Investments account on Crespo Company's books at the end of the year? (b) Repeat requirement (a) above except assume that the 42,000 shares represent a 25% interest in Paive Corporation.

On January 1, 2017, Tri-State Supply Company purchased at face value, a $1,000, 5%, bond that pays interest annually on January 1. Tri-State Company has a calendar year end. The adjusting entry on December 31, 2017, is

Hardin Park Company had these transactions pertaining to stock investments Feb. 1 Purchased 5,000 shares of Raley Company (10%) for $89,000 cash. June 1 Received cash dividends of $1 per share on Raley stock. Oct) 1 Sold 2,000 shares of Raley stock for $39,000. Dec) 1 Received cash dividends of $2 per share on Raley stock. The entry to record the receipt of the dividends June 1 would include a

Assume that Oslo Corp. acquires 30% of Celdon Corp. for $360,000 on January 1, 2017. The journal entry on Oslo's books assuming Celdon's net income for 2017 was $600,000 would include a debit to

Hardin Park Company had these transactions pertaining to stock investments Feb. 1 Purchased 5,000 shares of Raley Company (10%) for $89,000 cash. June 1 Received cash dividends of $1 per share on Raley stock. Oct) 1 Sold 2,000 shares of Raley stock for $39,000. Dec) 1 Received cash dividends of $2 per share on Raley stock. The entry to record the receipt of the dividends Dec. 1 would include a

McComb Inc. earns $1,350,000 and pays cash dividends for $450,000 during 2017. SFX Corporation owns 70,000 of the 210,000 outstanding shares of McComb. How much revenue from investment should SFX report in 2017?

Cedar Co. purchased 80, 6% LKN Company bonds for $80,000 cash. Interest is payable annually on January 1. If 40 of the securities are sold January 1 for $41,000 the entry would include a credit to Gain on Sale of Debt Investments of

Banks and financial institutions often purchase debt securities to

Under the equity method, the Stock Investments account is credited when the

A debt investment classified as trading securities is purchased for $73,500. At year end, when the fair value of the debt is $65,000, the adjusting entry includes a

The cost method of accounting for investments in stock should be employed when the

When an investor owns between 20% and 50% of the common stock of a corporation, it is generally presumed that the investor

At December 31, 2017, Grey Beard Inc. has these data on its security investments If the available-for-sale securities are held as long-term investments, which of the following will be recorded to adjust the securities to fair value?

Debt investments are investments in government and _____________ bonds.

The Fair Value Adjustment account is a balance sheet account. Identify the asset account it is related to. Explain how this account is increased and describe the procedure followed when its related asset account is disposed of.

La Bouisse Inc. obtained significant influence over E-Stock Corporation by buying 40% of E-Stock 30,000 outstanding shares common stock at a total cost of $11 per share on January 1, 2017. On June 15 E-Stock declared and paid a cash dividend of $32,000. On December 31 E-Stock reported a net income of $120,000 for the year. Instructions Prepare all the necessary journal entries for 2017 for La Bouisse Inc.

Barcelona Company owns 40% interest in the stock of ABX Corporation. During the year, ABX pays $40,000 in dividends to Barcelona, and reports $300,000 in net income. Barcelona Company's investment in ABX will increase by

On January 1, 2017, JBT Company purchased at face value, a $1,000 6%, bond that pays interest on January 1. JBT Company has a calendar year end. The entry on January 1, 2017, is

When investing excess cash for short periods of time, corporations invest in

Under the equity method, the investment in common stock is initially recorded at cost, and the Stock Investments account is adjusted annually.