Exam 15: Specimen Financial Statements: Pepsico, Inc

Debt investments are investments in government and corporation bonds.

If the fair value of an available-for-sale security exceeds its cost, the security should be written up to fair value and a realized gain should be recognized.

A company that owns more than 50% of the common stock of another company is known as the ______________ company and _____________ financial statements are usually prepared.

Trafton Company had the following transactions pertaining to debt investments. Instructions Journalize the transactions for 2017 and 2018.

Deutsche Corporation's equity securities portfolio at the end of the year is as follows: The year-end adjusting entry to reflect a decrease in the value of equity securities includes a

If the cost method is used to account for an investment in stock, the Stock Investments account is increased by the amount of dividends received during the period.

Chopper Company owns 15% interest in the stock of Elton Corporation. During the year, Elton pays $10,000 in dividends to Chopper, and reports $400,000 in net income. Chopper Company's investment in Elton will increase Chopper net income by

If the equity method is being used, cash dividends received

Dividends received on stock investments of less than 20% should be credited to the Stock Investments account.

Under the equity method, the receipt of dividends from the investee company results in an increase in the Stock Investments account.

The following transactions were made by Coral Company. Assume all investments are short-term. Instructions Journalize the transactions.

Santos Corporation has the following trading portfolio of debt investments as of December 31, 2017. Security Cost Fair Value \ 17,000 \ 16,000 23,000 25,000 32,000 28,000 \7 2,000 \6 9,000 On January 22, 2018, Santos Corporation sold security C for $30,000. Instructions (a) Prepare the adjusting entry for Santos Corporation on December 31, 2017 to report the portfolio at fair value. (b) Indicate the balance sheet and income statement presentation of the fair value data for the Santos Corporation at December 31, 2017. (c) Prepare the journal entry for the 2018 sale.

Cost and fair value data for the trading debt securities of Beltway Company at December 31, 2017, are $100,000 and $88,000, respectively. Which of the following correctly presents the adjusting journal entry to record the securities at fair value?

Which of the following is a debt security?

Assume that Chapman's Inc.'s trading debt securities have a total cost of $185,000 and a total fair value of $215,000 at year end. The related adjusting entry would include a debit to

At the end of the first year of operations, the total cost of the trading debt securities portfolio is $245,000. Total fair value is $250,000. The financial statements should show

Kalyn Gise is the daughter of Mark Gise, the founder and president of Carolina Blue Sky Enterprises. She has been working in various departments during school vacations throughout high school. She burst into the accounting department excitedly one morning. She said that the stock prices of several of the firm's short-term investments are up, and that her father said that the company had made over $10,000 because of this jump in stock prices. She asks to see how the increase is recorded. It is a very busy time in the accounting department, and so her question is deferred. Required: Prepare a brief note to answer Kalyn's question.

Under the equity method, the receipt of dividends from the investee company results in a credit to the Dividend Revenue account.

On January 1, 2017, Redwood Creek Company purchased 5,000 shares of Monticello Company stock for $300,000. Redwood Creek's investment represents 30 percent of the total outstanding shares of Monticello. During 2017, Monticello paid total dividends of $100,000 and reported net income of $290,000. What revenue does Redwood report related to this investment and what is the amount to be reported as an investment in Monticello stock at December 31.