Exam 15: Investments and International Operations

If a long-term investment in an equity security gives the investor significant influence over the investee, the investment is classified as available-for-sale.

A company holds $40,000 of 7% bonds as a held-to-maturity security. The journal entry to record receipt of a semiannual interest payment includes a debit to Cash for $2,800 and a credit to Interest Revenue for $2,800.

A company has net income of $130,500. Its net sales were $1,740,000 and its average total assets were $2,750,000. Its total asset turnover equals 4.7%.

All of the following statements regarding equity securities are true except:

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 sale of the 3,500 shares of stock on November 17 is:

Comprehensive income refers to all changes in equity during a period except those from owners' investments and dividends.

The cost method of accounting is used for long-term investments in equity securities with significant influence.

A company purchased $60,000 of 5% bonds on May 1 at par value. The bonds pay interest on March 1 and September 1. The amount of interest accrued on December 31 (the company's year-end)would be:

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

Long-term investments are reported in the:

Barnes Company purchased $50,000 of 8% bonds at par. The bonds mature in six years and are a held-to-maturity security. Which of the following is the correct journal entry to record the receipt of the semiannual interest payment?

Trading securities are securities that are purchased by trading securities with other companies rather than by paying cash.

An investor presumed to have significant influence owns at least 20% but not more than 50% of another company's voting stock.

Define the return on total assets and explain how it is used to measure a company's financial performance.

Landmark Corp. buys $300,000 of Schroeter Company's 8%, 5-year bonds at par value on September 1. Interest payments are made semiannually. All of the following regarding accounting for the securities are true except:

Available-for-sale debt securities are:

Long-term investments in available-for-sale securities are reported at fair value on the balance sheet.

On July 31, Potter Co. purchased 2,000 shares of GigaTech stock for $16,000. The investment is classified as available-for-sale securities. This is the company's first and only investment in available-for-sale securities. On October 31, which is Potter's year-end, the stock had a fair value of $20,000. Potter should record a:

Carpark Services began operations in 20X1 and maintains long-term investments in available-for-sale securities. The year-end cost and fair values for its portfolio of these investments follow. The year-end adjusting entry to record the unrealized gain/loss at December 31, 20X1 is: Available-for-Sale Securities Cost Fair value December 31,201 \ 250,000 \ 241,000 December 31,202 \ 340,000 \ 350,000 December 31,203 \ 410,000 \ 415,000

Trading securities are: