Exam 12: Reporting and Analyzing Investments

Ontario Corporation (a private corporation) reported the following transactions relating to its held for trading investments:Jan 1 Purchased 1,000 Manitoba Corporation shares for $45,000 cash.Jun 1 Received cash dividends of $0.50 per share from Manitoba Corporation.Sep 15 Sold 400 shares of Manitoba Corporation for $14,875.At year end (December 31), the Manitoba shares were trading at $42.Instructions a. Record the above transactions. b. Prepare the adjusting entry, if any, regarding the Manitoba shares at December 31. c. Indicate where any revenues and gains or losses (realized or unrealized) would appear in the financial statements.

If a company acquires a 40% interest in another company

Information flows among financial statements in this order:

Use the following information for questions. On January 1, 2018, 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, 2018, the fair value of the bonds was $23,950. -What is the entry to record the receipt of the interest on July 1, 2018?

Hankers Corporation buys 1,500 shares of Viggo Ltd.'s common shares as a trading investment. The shares are purchased for $45 a share. At year end the shares are trading at $48. The adjusting entry at year end is

On January 1, 2018, Coastal Corp. purchased 30% of the common shares of Mansbridge Corp. for $600,000. During 2018, Mansbridge Corp. reported net income of $75,000 and paid total cash dividends of $15,000. The balance in the Investment in Associates (Mansbridge) account on Coastal's books at December 31, 2018 is

Investments in associates are reported as current assets on the statement of financial position at their fair value.

Under the equity method of accounting for an investment

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

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

At acquisition, non-strategic investments are recorded at their purchase cost.

Amortization of bond discounts for bond investments will

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

Use the following information for questions. On January 1, 2018, 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, 2018, the fair value of the bonds was $23,950. -What is the entry to record the purchase?

Premiums and discounts must be amortized on all bond investments.

Use the following information for questions. On January 1, 2018, 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 held for trading investments. The bonds were sold on July 2, 2018 for $53,000. -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 for questions. On January 1, 2018, 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 held for trading investments. The bonds were sold on July 2, 2018 for $53,000. -Warner's entry to record the purchase would include a debit to

The ability of an investor to affect the operating and financial activities of another company, even though the investor does not control the company, is known as

Which of the following statements is not true?

Use the following information for questions. On January 1, 2017, 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, 2017 was $48,500. Marianne sold the bonds on January 2, 2018 for $48,500. -The entry for the sale of the bonds on January 2, 2018 is