Exam 15: Specimen Financial Statements: Pepsico, Inc

If a company has a stock investment that is properly accounted for by the equity method, what will be the effect on the financial statements when they receive a dividend from its investee?

Corporations invest in other companies for all of the following reasons except to

A reason some companies purchase investments is because they generate a significant portion of their earnings from investment income.

At the end of its first year, the equity securities portfolio consisted of the following common stocks. In the following year, the Edmunds common stock is sold for cash proceeds of $57,000. The gain or loss to be recognized on the sale is a

Stocks traded on the New York Stock Exchange are considered readily marketable.

When the cost method is used to account for an investment in stock, dividends received are accounted for as a reduction in the investment account.

Which of the following is a true statement about the accounting for long-term debt investments?

King George Company has these data at December 31, 2017: Debt Securities Cost Fair Value Trading \ 110,000 \ 119,000 Available-for-sale 100,000 95,000 The available-for-sale securities are held as a long-term investment. Instructions (a) Prepare the adjusting entries to report each class of securities at fair value. (b) Indicate the statement presentation of each class of securities and the related unrealized gain (loss) accounts.

Consolidated financial statements are useful to all of the following except

When investments in bonds are sold, any difference between the sales price and the fair value of the bonds is recorded as a gain or loss.

Short-term investments are listed on the balance sheet immediately below

The following transactions were made by Aquavore Company. Assume all investments are temporary. July 1 Purchased 400 shares of Delta Corporation common stock for $35 per share. 30 Received a cash dividend of $1.25 per share from the Delta Corporation. Sept. 15 Sold 80 shares of Delta Corporation stock for $38 per share. Instructions Journalize the transactions.

Dividends received on investments are accounted for in the same way under the cost and the equity method.

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

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

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 entry on January 1, 2017, is

Fair Value Adjustment is a valuation ____________ account, which is _______________ to (from) the cost of the investments.

If a parent company has two wholly owned subsidiaries, how many legal and economic entities are there from the viewpoint of the shareholders of the parent company?

When should a long-term investment in common stock be accounted for by the equity method? (b) When is revenue recognized under the equity method?

The Stock Investments account is debited at acquisition under both the equity method and cost method of accounting for investments in common stock.