Exam 15: Specimen Financial Statements: Pepsico, Inc

Using the cost method of accounting for a stock investment, the journal entry to record the receipt of dividends involves a credit to Dividend Revenue.

Eglin Company owns 30% interest in the stock of Bosco Corporation. During the year, Bosco pays $10,000 in dividends to Eglin, and reports a net loss of $200,000. Eglin Company's investment in Bosco will affect Eglin net income by a

Baggles Company owns stock in Hampshire Industries, which it intends to hold indefinitely because of some negative tax consequences if sold. Which of the following statements is true regarding Baggles' reporting of the stock?

The Fair Value Adjustment account is a(n)

Mazzeo Company acquires 80 Dodd's 10%, 5 year, $1,000 bonds on January 1, 2017 for $80,000. Assume Dodd's pays interest annually on January 1. Mazzeo's journal entry at December 31, 2017 would include a credit to

Grafton Company had the following transactions pertaining to its short-term stock investments. Jan. 1 Purchased 2,000 shares of Hortez Company stock for $101,100 cash. June 1 Received cash dividends of $2.70 per share on the Hortez Company stock. Sept. 15 Sold 1,000 shares of the Hortez Company stock for $49,600. Dec. 31 The fair values of the securities were $50,800. Prepare the adjusting entry to report the portfolio at fair value. Instructions (a) Journalize the transactions. (b) Indicate the income statement effects of the transactions.

Which of the following is the correct matching concerning the appropriate accounting for long-term stock investments?

When a company owns more than 50% of the common stock of another company

An unrealized gain or loss on available-for-sale securities is reported as a separate component of _________________.

Under the cost method of accounting for dividends

Reporting investments at fair value is

All of the following statements about financial statement gains and losses on debt investments are true except

Consolidated financial statements report the financial position of two or more legal entities just as if they were one reporting unit. For which parties are these financial statements useful and are they the only financial statements a parent or subsidiary company needs to prepare?

An investment is readily marketable if it is management's intent to sell the investment.

On January 1, Ollinger Company purchased a 25% equity investment in Fava Company for $300,000. At December 31 Fava declared and paid a $20,000 dividend and reported net income of $120,000. Instructions (a) Journalize the transactions (b) Determine the amount to be reported as an investment in Fava stock at December 31.

For accounting purposes, the method used to account for investments in common stock is determined by

Deutsche Corporation's trading portfolio at the end of the year is as follows: At the end of the year, Deutsche Corporation should A) set up a Fair Value Adjustment account for Common Stock B. B) set up a Fair Value Adjustment account for the portfolio. C) recognize an Unrealized Gain or Loss-Income for $6,000. D) report a loss on the income statement for $6,000 under "Other Expenses and Losses."

In accounting for stock investments of less than 20%, the equity method is typically used.

Which of the following is the correct matching concerning an investor's influence on the

The valuation of available-for-sale debt securities is similar to the procedures followed for trading debt securities, except that changes in fair value are not recognized in current income.