Exam 15: Investments and International Operations

Return on total assets can be separated into the profit margin ratio and total asset turnover.

Consolidated financial statements show the financial position, results of operations, and cash flows of all entities under the parent's control, including all subsidiaries.

Identify the classifications for non-influential investments in securities.What are the accounting basics for non-influential investments in securities, including acquisition, dividends earned, and disposition?

Available-for-sale securities are actively managed like trading securities because the company intends to trade them for profit in the short term.

Unrealized gains and losses on trading securities are reported on the income statement.

Discuss the reasons companies make investments.

A controlling influence over the investee is based on the investor owning voting stock exceeding:

Long-term investments in debt securities not classified as trading or held-to-maturity securities are classified as available-for-sale securities.

Equity securities giving an investor significant influence over an investee are always considered short-term investments.

On January 4, Year 1, Barber Company purchased 5,000 shares of Convell Company for $59,500 plus a broker's fee of $1,000. Convell Company has a total of 25,000 shares of common stock outstanding and it is presumed the Barber Company will have a significant influence over Convell. During each of the next two years, Convell declared and paid cash dividends of $0.85 per share, and its net income was $72,000 and $67,000 for Year 1 and Year 2, respectively. What is the book value of Barber's investment in Convell at the end of Year 2?

Marshall Company sold supplies in the amount of €25,000 (euros)to a French company when the exchange rate was $1.21 per euro. At the time of payment, the exchange rate decreased to $0.82. Marshall must record a:

On June 18, Wyman Company (a U.S. Company)sold merchandise to the Nielsen Company of Denmark for €60,000 (Euros), with a payment due in 60 days. If the exchange rate was $1.35 per euro on the date of sale and $1.14 per euro on the date of payment, Wyman Company should recognize a foreign exchange gain or loss in the amount of:

Financial statements that show the financial position, results of operations, and cash flows of all entities under the parent company's control, including all subsidiaries are known as:

The equity method with consolidation is used to account for long-term investments in equity securities with controlling influence.

Debt securities are recorded at cost when purchased.

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 fair value of the remaining shares is $29.50 per share. The impact on Jewel's net income as a result of its investment in Marcelo Corp. was a(n):

A company had a profit margin of 10.5% and total asset turnover of 1.84. Its return on total assets was:

What are the accounting basics for debt securities, including recording their acquisition, interest earned, and their disposal?

Short-term investments are also called temporary investments or marketable securities.

Short-term investments are intended to be converted into cash within the longer of one year or the current operating cycle of the business, and are readily convertible to cash.