Exam 12: Reporting and Analyzing Investments

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 (if any) to record the fair value adjustment on December 31, 2022? Assume the adjusting entry for the interest accrual has already been recorded.

Corporations purchase investments in debt or equity securities for the income tax write-off.

Use the following information for questions On January 1, 2021, Soo Park Corp.purchased at face value, a $5,000, 5%, bond investment that pays interest on January 1 and July 1.Soo Park classified the investment as long-term.Soo Park has a calendar year end. -The adjusting entry on December 31, 2021, is

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 purchase would include a debit to

Debt investments earn interest income over time and the borrower has an obligation to return the original amount of the investment on a fixed maturity date.

Premiums and discounts must be amortized on all bond investments.

Trading investment(s)

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

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 entry to adjust to fair value on December 31, 2021 is

When an investor owns more than 50% of the common shares of another company,

If 30% of the common shares of an investee are purchased as a long-term investment, the appropriate classification for this investment is most likely

Strategic investments are debt or equity securities that are usually purchased to generate investment income.

Which one of the following statements is false?

Interest income is calculated by multiplying the carrying amount of the bond investment by the market rate of interest when the bond was purchased prorated by the portion of the payment period covered during the year.

Under the equity method, the Investment in Associates account is increased when the

Which of the following is the correct match concerning an investor's influence on the operations and financial affairs of an investee?

Preferred shares are often purchased as strategic investments.

Securities that can be purchased for strategic purposes

Trading Investments are all of the following except

When the cost method is used to account for an equity investment, the carrying amount of the investment is affected by