Exam 29: Investments

Present entries to record the following selected transactions of Masterson Co.(a)Purchased 600 shares of the 100,000 shares outstanding $10 par common shares of Dankin Corporation for $5,100.(b)Purchased 3,500 shares of the 10,000 shares no par common shares of Ramon Co. for $45,700. The investment was accounted for by the equity method.(c)Received a cash dividend of $1 per share on the Dankin Corporation stock acquired in (a).(d)Received a cash dividend of $2 per share on the Ramon Co. stock acquired in (b).(e)Sold 100 shares of the Dankin Corporation shares acquired in (a) for $2,100.(f)Dankin Corporation reported net income of $30,000 and Ramon Company's reported net income was $50,000.

Held-to-maturity securities

Temporary investments

The primary objectives of investing in temporary investments is to

Match each of the definitions that follow with the appropriate investment term (a-i). a.equity method b.parent company c.subsidiary company d.consolidated financial statements e.fair value f.unrealized gain or loss on investments.g.valuation allowance for investments h.amortized cost i.fair value method -combined reporting of a corporation and other corporations it controls

Discuss the similarities and differences in reporting trading securities, available-for-sale securities, and held-to-maturity securities.

In order to maintain a record of the original cost of a trading security, the fair value adjustments are debited or credited to the account Valuation Allowance for Trading Investments.

Financial statements in which financial data for two or more companies are combined as a single entity are called

The fair value method of accounting for stock

Unrealized gains and losses on trading securities are not included in the calculation of income from operations.

Match each of the definitions that follow with the appropriate investment term (a-j). -preferred and common stock that represent ownership in a company and do not have a fixed maturity date A)debt securities B)equity securities C)investor D)investee E)fair value method F)trading securities G)available-for-sale securities H)held-to-maturity securities I)equity method J)business combination

Skyline, Inc. purchased a portfolio of trading securities during the current fiscal year. The cost and fair value of this portfolio on December 31 was as follows: (a) Provide the journal entry to record the adjustment of the trading security portfolio to fair value on December 31.(b) Where will the information from the journal entry be reported on the financial statements?

Journalize the entries to record the following selected equity investment transactions completed by Perry Company during the current year. Perry accounts for this investment using the fair value method.​

An investor purchased 500 shares of common stock, $25 par, for $21,750. Subsequently, 100 shares were sold for $49.50 per share. What is the amount of gain or loss on the sale?

Following are data for the trading securities held by Lindy Company as of December 31: (a) Complete the table above to find the total cost and fair value for the company's trading securities portfolio.(b) Calculate and record the required December 31 adjustment.(c) Explain how the adjustment from step (b) is reported on Lindy's financial statements.

The equity method of accounting for investments

Trading securities are

On May 1, Pierce Company purchased $60,000 of Stanton Company's 12% bonds at 100 plus accrued interest of $2,400. On June 30, Pierce received its first semiannual interest. On February 1, Pierce sold $50,000 of the bonds at 103 plus accrued interest.​ -The journal entry Pierce will record on June 30 will include a

Blanton Corporation purchased 15% of the outstanding shares of common stock of Worton Corporation as a long-term investment. Subsequently, Worton Corporation reported net income and declared and paid cash dividends. What journal entry would Blanton Corporation use to record the dividends it receives?

Alan Company purchased $400,000 of ABC Co. 5% bonds at 100 plus accrued interest of $4,500. Alan later sold $250,000 of bonds at 97. The journal entry for the purchase would include a