Exam 12: Reporting and Analyzing Investments

Use the following information for questions On January 1, 2022, Warner Inc.purchased 3.5%, $50,000 face value Jackson Corp.bonds at face value.Interest is payable semi-annually on July 1 and January 1.The bonds are classified as trading investments.The bonds were sold on July 2, 2022 for $53,000. -Warner's entry to record the sale on July 2, after the July 1 interest was received and recorded, would include a

Which of the following would never be classified as a long-term investment?

Use the following information for questions On January 1, 2021, Marianne Corp.purchased $50,000, of Robin Ltd.'s 4%, 10-year bonds for $48,000, since the market interest rate was approximately 4.5%.The bonds pay interest on January 1 and July 1.Marianne has a calendar year end, and classified the bonds as long-term investments.The fair value on December 31, 2021 was $48,500.Marianne sold the bonds on January 2, 2022 for $48,500. -The adjusting entry for interest on December 31, 2021, is

Use the following information to answer questions Wells Inc.reported these transactions relating to marketable Trading Investments intended to generate net income and to be sold in the near term: -The entry, if any is required, to record the value of the investment on December 31 would include a debit to

When an investee can be significantly influenced, it is known as an associate.

Realized gains and losses are always reported in the statement of income.

Which of the following valuations models reports unrealized gains and losses on the statement of income?

If a company reporting under ASPE decides to use the cost model to account for an investment in common shares, dividends received should be

Which of the following is false?

If one company owns more than 50% of the common shares of another company

Use the following information to answer questions Wells Inc.reported these transactions relating to marketable Trading Investments intended to generate net income and to be sold in the near term: -The entry to record the purchase of the Taylor shares on Feb 1 would include a

At acquisition, the investment account is debited for the cost of the shares under both the cost and equity methods of accounting for strategic investments.

When investing excess cash for short periods of time, corporations generally invest in any of the following, except

Frisbee Inc.owns a 30% interest in the shares of California Corp.During the year, California pays $10,000 in dividends to Frisbee and reports a net loss of $80,000.Frisbee's investment in California will affect Frisbee's net income by

The receipt of dividends from an investment affects the investment account when which of the following methods is used?

Use the following information for questions On January 1, 2022, Burkett Corporation purchased, as a long-term investment, a $25,000, 5% bond, for $21,595.At this time, the market rate of interest was approximately 7%.The bond pays interest on January 1 and July 1.On December 31, 2022, the fair value of the bonds was $23,950. -What is the entry to record the receipt of the interest on July 1, 2022?

On January 1, Saskatoon Corporation purchased as a trading investment a $1,000, 6% bond for $1,060.The bond pays interest on January 1 and July 1.After receiving and recording the interest, the bond is sold on July 1 for $1,100.What is the entry to record the cash proceeds at the time the bond is sold?

Use the following information to answer questions Wells Inc.reported these transactions relating to marketable Trading Investments intended to generate net income and to be sold in the near term: -The entry to record the receipt of the dividends on Jun 1 would include a

When a company controls the common shares of another company

Eurythmics Ltd.owns 20% interest in the shares of Sydney Corporation.During the year, Sydney pays $10,000 in dividends to Eurythmic and reports a net loss of $50,000.Eurythmic's investment in Sydney will affect Eurythmics's net income by