Exam 15: Investments and International Operations

On May 1, Jorge Co. purchases 2,000 shares of Radiotech stock for $25,000. This investment is considered to be an available-for-sale investment. This is the company's first and only investment in available-for-sale securities. On July 31 (Jorge's year-end), the stock had a market value of $28,000. Jorge should record a credit to Unrealized Gain-Equity for $3,000.

All of the following statements relating to accounting for international operations are true except:

Roe Corporation owns 2,000 shares of WRJ Corporation stock. WRJ Corporation has 25,000 shares of stock outstanding. WRJ paid $4 per share in cash dividends to its stockholders. The entry to record the receipt of these dividends is:

Define the foreign exchange rate between two currencies. Explain its effect on business transactions conducted in a foreign currency.

Equity securities reflect a creditor relationship such as investments in notes, bonds, and certificates of deposit.

The currency in which a company presents its financial statements is known as the:

Select the correct statement from the following:

Trading securities are always reported as current assets.

If a U.S. Company's credit sale to an international customer allows payment to be made in a foreign currency, the same exchange rate must be used for the date of sale and the cash payment date.

Management's intent determines whether an available-for-sale security is classified as long-term or short-term.

A company should report its portfolio of trading securities at its fair value.

Both U.S. GAAP and IFRS permit companies to use fair value in reporting available-for-sale and held-to-maturity securities.

Any cash dividends received from equity securities are recorded as Dividend Expense.

On February 15, Jewel Company buys 7,000 shares of Marcelo Corp. common stock at $28.53 per share plus a brokerage fee of $400. The stock is classified as available-for-sale securities. This is the company's first and only investment in available-for-sale securities. On March 15, Marcelo Corp. declares a dividend of $1.15 per share payable to stockholders of record on April 15. Jewel Company received the dividend on April 15 and ultimately sells half of the Marcelo Corp. stock on November 17 of the current year for $29.30 per share less a brokerage fee of $250. The balance in the investment account on April 16 is:

A U.S. company makes a sale to a foreign customer receivable in 30 days in the customer's currency. The sale would be recorded by the U.S. company on the date:

J.P. Industries purchased 2,000 shares of Yang's common stock for $143,000 as a long-term investment. The investment is classified as available-for-sale securities. The par value of the stock was $1 per share. J.P. paid $375 in commissions on the transaction. J.P.'s entry to record the purchase transaction would include a:

On February 15, Jewel Company buys 7,000 shares of Marcelo Corp. common stock at $28.53 per share plus a brokerage fee of $400. The stock is classified as available-for-sale securities. This is the company's first and only investment in available-for-sale securities. On March 15, Marcelo Corp. declares a dividend of $1.15 per share payable to stockholders of record on April 15. Jewel Company received the dividend on April 15 and ultimately sells half of the Marcelo Corp. stock on November 17 of the current year for $29.30 per share less a brokerage fee of $250. The journal entry to record the dividend on April 15 is:

If a U.S. company's credit sale to an international customer allows payment to be made in a foreign currency, the sale transaction is recorded using the exchange rate on the date of sale.

All of the following statements regarding accounting for noninfluential securities under U.S. GAAP and IFRS are true except:

A company had net income of $43,000, net sales of $380,500, and average total assets of $220,000. Its profit margin and total asset turnover were, respectively: