Exam 14: Time Value of Money

Jim and Aneta O'Connor invested $12,000 in a savings account paying 5% annual interest when their son, Austin, was born. They also deposited $500 on each of his birthdays until he was 20 (including his 20th birthday). Jim and Aneta have obtained the following values related to the time value of money to help them with their planning process for their compounded interest decisions. To the closest dollar, how much was in the savings account on his 20th birthday (after the last deposit)?

The valuation of available-for-sale securities is similar to the procedures followed for trading securities, except that changes in fair value are not recognized in current income.

On August 1, Basil Company buys 2,000 shares of Zingo common stock for $61,500 cash. On December 1, the stock investments are sold for $76,000 in cash. Which of the following are the correct journal entries of record for the purchase and sale of the common stock?

Short-term investments are listed on the balance sheet immediately below

Sandafor Company had these transactions pertaining to stock investments: Feb 1 Purchased 2,400 shares of BFF common stock (2% of outstanding shares) for $16,500 cash. July 1 Received cash dividends of $0.80 per share on BFF common stock. Sept. 1 Sold 800 shares of BFF common stock for $7,900 Dec. 1 Received cash dividends of $.80per share on BFF common stock. Instructions Journalize the transactions.

Information pertaining to stock investments in 2012 by Com-ex Corporation follows: Acquired 15% of the 200,000 shares of common stock of Buffa

On January 1, 2014, Chic Corp. paid $1,200,000 for 100,000 shares of Toto Company's common stock, which represents 40% of Toto's outstanding common stock. Toto reported income of $300,000 and paid cash dividends of $80,000 during 2014 Chic should report the investment in Toto Company on its December 31, 2014, balance sheet at

Ebastian Hale owns a garage and is contemplating purchasing a tire retreading machine for $18,150. After estimating costs and revenues, Sebastian projects a net cash flow from the retreading machine of $3,300 annually for 8 years. Sebastian hopes to earn a return of 10 percent on such investments. What is the present value of the retreading operation? Should Sebastian purchase the retreading machine?

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

At the end of the first year of operations, the total cost of the trading securities portfolio is $179,000 and the total fair value is $174,000. What should the financial statements show?

A series of equal periodic receipts or payments are called annuities.

In order to use the cost method of accounting for stock investments, how much stock must the investor own?

At the end of the first year of operations, the total cost of the trading securities portfolio is $245,000. Total fair value is $250,000. The financial statements should show

If you are able to earn a 15% rate of return, what amount would you need to invest to have $6,500 one year from now?

Consolidated financial statements are useful to all of the following except

Short-term investments should be valued on the balance sheet at

The equity method should generally be used to account for an investment in stock when the level of ownership is

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: 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: 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

On January 1, 2014, Valentine Corporation purchased 25% of the common stock outstanding of Betz Corporation for $100,000. During 2014, Betz Corporation reported net income of $40,000 and paid cash dividends of $24,000. The balance of the Stock Investments-Betz account on the books of Valentine Corporation at December 31, 2014, is

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?