Exam 14: Time Value of Money

On January 1, U.K. Enterprise purchased as an investment a $1,000, 6% bond for $1,000. The bond pays interest on January 1 and July 1. The bond is sold on September 1 for $1,100 plus accrued interest. Interest has not been accrued since the last interest payment date. What is the entry to record the cash proceeds at the time the bond is sold?

For available-for-sale securities, the unrealized gain or loss account is carried forward to future periods.

On January 1, 2014, JBT Company purchased at face value, a $1,000 6%, bond that pays interest on January 1 and July 1. JBT Company has a calendar year end. The entry for the receipt of interest on January 1, 2015 is

ischer Company has decided to begin accumulating a fund for plant expansion. The company deposited $20,000 in a fund on January 2, 2012. Fischer will also deposit $60,000 annually at the end of each year, starting in 2012. The fund pays interest at 5% compounded annually. What is the balance of the fund at the end of 2016 (after the 2016 deposit)?

Dodd Company is considering an investment, which will return a lump sum of $675,000 four years from now. Below is some of the time value of money information that Dodd has compiled that might help in planning compounded interest decisions. To the closest dollar, what amount should Dodd Company pay for this investment to earn a 10% return?

The present value of $10,000 to be received in 5 years will be smaller if the discount rate is

inek Company deposited $12,500 annually for 6 years in an account paying 5% interest compounded annually. What is the balance of the account at the end of the 6th year?

Which of the following is the correct matching concerning the appropriate accounting for long-term stock investments?

avid 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?

Reporting investments at fair value is

Trafton Company had the following transactions pertaining to debt securities held as an investment. Jan. 1 Purchased 60, 8%, $1,000 Hammond Company bonds for $60,000 cash. Interest is payable semiannually on July 1 and January 1. July 1 Received semiannual interest on Hammond Company bonds. Sept. 1 Sold 30 Hammond Company bonds for $32,000 plus accrued interest. Instructions (a) Journalize the transactions. (b) Prepare the adjusting entry for the accrual of interest on December 31.

If the cost method is used to account for an investment in common stock, dividends received should be

On January 1, 2014, Redwood Creek Company purchased 5,000 shares of Monticel

A company that owns more than 50% of the common stock of another company is known as the

The Stock Investments account is debited at acquisition under both the equity method and cost method of accounting for investments in common stock.

If the fair value of an available-for-sale security exceeds its cost, the security should be written up to fair value and a realized gain should be recognized.

Akers Company is considering purchasing a machine. The machine will produce the following cash flows: Akers requires a minimum rate of return of 10%. What is the maximum price Akers should pay for this machine?

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

Hardin Park Company had these transactions pertaining to stock investments Feb. 1 Purchased 2,500 shares of Raley Company (10%) for $44,500 cash. June 1 Received cash dividends of $1 per share on Raley stock. Oct) 1 Sold 1,000 shares of Raley stock for 19,500. Dec) 1 Received cash dividends of $2 per share on Reley stock. The entry to record the purchase of the Raley stock would include a

CGS Corporation makes an investment in 200 shares of Bama Company's common stock. The stock is purchased for $53 a share. The entry for the purchase is: