Exam 14: Understanding Investments and Acquisitions in Accounting

David Jones deposited $6,500 in an account paying interest of 5% compounded annually. What amount would be in the account at the end of 4 years?

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?

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

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

SBB Company issued 11%, 5-year, $600,000 face value bonds that pay interest semi-annually on October 1 and April 1. The bonds are dated April 1, 2014, and are issued on that date. The discount rate of interest for such bonds on April 1, 2014, is 10%. What cash proceeds did SBB Company receive from issuance of the bonds?

Cantor Corporation's balance sheet at December 31, 2013, showed the following: Short-term investments, at fair value $46,500 Cantor Corporation's trading portfolio of stock investments consisted of the following at December 31, 2013: Investment Number of Shares Cost Interstate Common Stock 200 \ 30,000 Danforth Preferred Stock 400 6,000 Georgin Common Stock 300 9,000 \ 4500 During 2014, the following transactions took place: Feb. 5 $\quad$ Sold 50 shares of Interstate common stock for $7,900. Mar. 30 $\quad$ Purchased 25 shares of Georgia common stock for $850. Sept. 9 $\quad$ Purchased 50 shares of Georgia common stock for $2,000. At year end on December 31, 2014, the fair values per share were: Market Value Per Share Interstate Common Stock \ 151.00 Danforth Delta Preferred Stock \ 13.00 Georgin Common Stock \ 33.00 Instructions (a) Prepare the journal entries to record the 2014 stock transactions. (b) On December 31, 2014, prepare any adjusting entry that might be necessary relative to the trading portfolio. (c) Show how the stock investments will appear on Cantor Corporation's balance sheet at December 31, 2014.

The company whose stock is owned by the parent company is called the

The purchase of a company in the same industry that does the same activity is called a ______________ acquisition.

Why do corporations generally invest in debt or equity securities?

Which of the following is not a category used for valuing and reporting investments?

The purchase of a company that is in the same industry but involved in a different activity is called a

High Country Stables, Inc., operates several dog-racing tracks throughout the United States. Since most facilities are outdoor tracks only, most of the cash receipts for High Country are received from April through October. These funds are usually invested in temporary, very liquid investments, such as stocks and bonds. Among the stocks purchased last year, was Vendable, Inc. a company specializing in automatic vending equipment. The company decided not to sell its Vendable stock at the end of last year, and has purchased more of the stock this year. The company intends to continue to purchase stock until it holds enough to make a takeover bid for the company. The accountants have been instructed to continue to classify the investment as temporary until the takeover is accomplished, so that less attention will be directed to it. (Presently, High Country has no long-term investment in stock at all.) Required: 1. Is it ethical for High Country to attempt to take over another company? Explain. 2. Is it ethical for High Country to leave its investment in the temporary investment category? Explain.

The amount you must deposit now in your savings account paying 6% interest, in order to accumulate $2,000 for a down payment 5 years from now on a new Vintage Convertible Mustang is

An unrealized loss on trading securities is reported under Other ____________________ in the income statement.

Hale Corporation issues an 8%, 9-year mortgage note on January 1 2014, to obtain financing for new equipment. The terms provide for semiannual installment payments of $32,900. The following values related to the time value of money were available to Hale to help them with their planning process and compounded interest decisions. Present value of 1 for 9 periods at 8\% 0.50025 Present value of 1 for 18 periods at 4\% 0.49363 Future value of 1 for 9 periods at 8\% 1.99900 Future value of 1 for 18 periods at 4\% 2.02582 Present value of an annuity of 1 for 9 periods at 8\% 6.24689 Present value of an annuity of 1 for 18 periods at 4\% 12.65930 Future value of an annuity of 1 for 9 periods at 8\% 12.48756 Future value of an annuity of 1 for 18 periods at 4\% 25.64541 To the closest dollar, what were the cash proceeds received from the issuance of the note?

At the end of its first year, the trading securities portfolio consisted of the following common stocks. The unrealized loss to be recognized under the fair value method is

Which one of the following would not be classified as a short-term investment?

On January 5, 2012, JBC Company purchased the following stock investments: 300 shares Getz Corporation common stock for $4,800. 500 shares Keller Corporation common stock for $10,000. 600 shares R-tel Corporation common stock for $18,000. Assume that JBC Company cannot exercise significant influence over the activities of the investee companies and that the cost method is used to account for the investments. On June 30, 2014, JBC Company received the following cash dividends: Getz Corporation \ 2.00 per share Keller Corporation c \ 3.00 per share R-tel Corporation \ 1.50 per share On November 15, 2014, JBC Company sold 100 shares of R-tel Corporation common stock for $3,600. On December 31, 2014, the fair value of the securities held by JBC Company is as follows: Per Share Getz Corporation common stock \ 12 Keller Corporation common stock 16 R-tel Corporation common stock 33 Instructions Prepare the appropriate journal entries that the JBC Company should make on the following dates: January 5, 2014 June 30, 2014 November 15, 2014 December 31, 2014

The following transactions were made by Coral Company. Assume all investments are short-term. June 2 $\quad$ Purchased 600 shares of Schmidt Corporation common stock for $45 per share. July 1 $\quad$ Purchased 210 Dantzler Corporation bonds for $210,000. $\quad$ 30 $\quad$ Received a cash dividend of $2.25 per share from the Schmidt Corporation. Sept. 15 $\quad$ Sold 120 shares of Schmidt Corporation stock for $50 per share. Dec. 31 $\quad$ Received semiannual interest check for $9,240 from the Dantzler Corporation. $\quad$ 31 $\quad$ Received a cash dividend of $2.25 per share from the Schmidt Corporation. Instructions Journalize the transactions.

Which is not a strategic reason to invest?