Exam 12: Reporting and Analyzing Investments

Laski Corp. holds two held for trading investments and has decided to use the fair value through profit or loss model. At year end, one has an unrealized gain of $2,000 and the other has an unrealized loss of $4,500. The held for trading investments would be reported at fair value and Laski Corp. would report a net unrealized loss of

When a company controls the common shares of another company

If the equity method is being used, the Income from Associates account is

Account for strategic investments.

Identify reasons to invest, and classify investments.

No unrealized gains and losses are recorded when using the amortized cost model.

Metro Corporation reported the following transactions relating to its held for trading investments:Jan 1 Purchased 1,000 shares of London Ltd. shares for $64,000 cash.Jun 1 Received cash dividends of $5 per share on the London shares.Sep 15 Sold 250 London shares for $15,500.Dec 31 The fair value of the London shares was $49,250.Instructions a. Record the above transactions and events. b. Indicate where any revenues and gains or losses (realized or unrealized) would appear in the financial statements.

Use the following information for questions. On January 1, 2017, 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 entry for the receipt of interest on July 1, 2017, is

Which of the following is the correct match concerning the appropriate accounting for strategic investments?

Which of the following is not true about the accounting for Held for Trading Investments?

On January 1, 2017, Palermo Corp. purchased $50,000 of Sicilia Ltd.'s 5%, 5-year bonds for $52,250, since the market interest rate was approximately 4%. The bonds pay interest on January 1 and July 1. Palermo Corp. has a calendar year end, and classified the bonds as a long-term investment. The fair value of the bonds on December 31, 2017 was $51,500. On January 2, 2018, Palermo sold the bonds for $51,000.InstructionsPrepare the required entries to record the above transactions and events. Round all values to the nearest dollar.

Debt investments include all of the following except

Held for trading investment(s)

Glover Corporation reported the following transactions relating to its held for trading investments:Jan 1 Purchased $100,000 Chandler Corporation 6% bonds for $104,000. Interest is receivable semi-annually on July 1 and January 1.Jul 1 Received semi-annual interest on the Chandler Corporation bonds.Jul 2 Sold one-half of the Chandler Corporation bonds for $53,000.Instructions a. Record the above transactions. b. Prepare the adjusting entry for the accrual of interest on December 31.

On January 1, 2018, Henderson Corp. purchased 10,000 Alpha Inc. shares for $825,000. This investment represents 30% of the total issued common shares of Alpha Inc. During 2018, Alpha paid total dividends of $60,000 and reported net income of $325,000. At December 31, 2018, the fair value of the Alpha Inc. shares was $950,000.Instructions a. Calculate the revenue that Henderson reports for 2018 related to this investment. b. Determine the amount to be reported on the statement of financial position under "Investment in Associates" at December 31, 2018.

Use the following information for questions. On January 1, 2017, 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, 2017, is

If a trading investment in bonds is sold one month after its value was adjusted at year end, the investment account is

Held for Trading Investments are listed on the statement of financial position immediately below

If an investment in an associate is sold at a gain, the gain

On January 1, Oak Corporation purchased a 40% equity investment in Pine Corporation for $600,000. On December 31, Pine paid a $20,000 dividend and reported a net loss of $120,000. The fair value of the shares on December 31 was $550,000.Instructions a. Record the above transactions and events. b. Determine the amount to be reported as the investment in Pine Corporation at December 31.