Question 1

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

Accepted Answer

A) True 
 B)False  True

Question 2

Rosser 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.Rosser must record a:

Accepted Answer

A) gain of $9,750. 
B) gain of $20,500. 
C) loss of $9,750. 
D) loss of $20,500. 
E) neither a gain nor loss. 
A) gain of $9,750. 
B) gain of $20,500. 
C) loss of $9,750. 
D) loss of $20,500. 
E) neither a gain nor loss. C

Question 3

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

Accepted Answer

fair value

Question 4

When an investor company owns more than 25% of the voting stock of an investee company,it has a controlling influence.

Accepted Answer

A) True 
 B)False

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

A company had net income of $2,660,000,net sales of $25,000,000,and average total assets of $8,000,000.Its return on total assets equals:

Accepted Answer

A) 3.01%. 
B) 10.64%. 
C) 32.00%. 
D) 33.25%. 
E) 300.75%. 
A) 3.01%. 
B) 10.64%. 
C) 32.00%. 
D) 33.25%. 
E) 300.75%.

Question 7

Halam Company had the following transactions relating to investments in trading securities during the year.Prepare the required general journal entries for these transactions.

Accepted Answer

The answer of Halam Company had the following transactions relating...

Question 8

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

Accepted Answer

A) The entire portfolio of trading securities is reported at is fair value. 
B) An unrealized gain or loss from a change in fair value is reported on the income statement. 
C) A realized gain or loss is recorded when the securities are sold and reported on the income statement. 
D) When the period-end fair value adjustment for the portfolio of trading securities is computed, it includes the cost and fair value of any securities sold. 
E) When the period-end fair value adjustment for the portfolio of trading securities is computed, it excludes the cost and fair value of any securities sold. 
A) The entire portfolio of trading securities is reported at is fair value. 
B) An unrealized gain or loss from a change in fair value is reported on the income statement. 
C) A realized gain or loss is recorded when the securities are sold and reported on the income statement. 
D) When the period-end fair value adjustment for the portfolio of trading securities is computed, it includes the cost and fair value of any securities sold. 
E) When the period-end fair value adjustment for the portfolio of trading securities is computed, it excludes the cost and fair value of any securities sold.

Question 9

On April 1 of the current year,a company paid $150,000 cash to purchase 7%,10-year bonds with a par value of $150,000; interest is paid semiannually each April 1 and October 1.The company intends to hold these bonds until they mature.Prepare the journal entries to record the bond purchase,the receipt of the first semiannual interest payment on October 1 of the current year,and the accrual of interest for the year-end December 31.

Accepted Answer

The answer of On April 1 of the current year,a...

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

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

Accepted Answer

A) Under the equity method, the share of investee's net income is reported in the investor's income in the same period the investee earns that income. 
B) Under the consolidation method, investee and investor revenues and expenses are combined. 
C) Under the equity method, the investment account equals the acquisition cost plus the share of investee income plus the share of investee dividends. 
D) Under the consolidation method, nonintercompany assets and liabilities are combined (eliminating the need for an investment account). 
E) U.S.GAAP companies commonly refer to noncontrolling interests in consolidated subsidiaries as minority interests whereas IFRS companies use noncontrolling interests. 
A) Under the equity method, the share of investee's net income is reported in the investor's income in the same period the investee earns that income. 
B) Under the consolidation method, investee and investor revenues and expenses are combined. 
C) Under the equity method, the investment account equals the acquisition cost plus the share of investee income plus the share of investee dividends. 
D) Under the consolidation method, nonintercompany assets and liabilities are combined (eliminating the need for an investment account). 
E) U.S.GAAP companies commonly refer to noncontrolling interests in consolidated subsidiaries as minority interests whereas IFRS companies use noncontrolling interests.

Question 13

Seamark buys $300,000 of Eider's 8% five-year bonds payable at par value.Interest payments are made semiannually.Seamark plans to hold the bonds for the five year life.When the bonds mature,the journal entry to record the proceeds will be:

Accepted Answer

A) Debit Long-Term Investments-HTM $300,000; credit Cash $300,000. 
B) Debit Cash $300,000; credit Interest Revenue $300,000. 
C) Debit Cash $300,000; credit Long-Term Investments-HTM $300,000. 
D) Debit Cash $300,000; credit Interest Receivable $300,000. 
E) Debit Cash $300,000; credit Bonds Payable $300,000. 
A) Debit Long-Term Investments-HTM $300,000; credit Cash $300,000. 
B) Debit Cash $300,000; credit Interest Revenue $300,000. 
C) Debit Cash $300,000; credit Long-Term Investments-HTM $300,000. 
D) Debit Cash $300,000; credit Interest Receivable $300,000. 
E) Debit Cash $300,000; credit Bonds Payable $300,000.

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

Investments can be classified as:

Accepted Answer

A) Trading securities. 
B) Held-to-maturity debt securities. 
C) Available-for-sale debt securities. 
D) Available-for-sale equity securities. 
E) All of the choices are correct. 
A) Trading securities. 
B) Held-to-maturity debt securities. 
C) Available-for-sale debt securities. 
D) Available-for-sale equity securities. 
E) All of the choices are correct.

Question 16

Bond sinking funds are examples of short-term investments.

Accepted Answer

A) True 
 B)False

Question 17

Short-term investments in held-to-maturity debt securities are accounted for using the ______________________.

Accepted Answer

cost metho

Question 18

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

Accepted Answer

A) $60,000 gain. 
B) $60,000 loss. 
C) $68,400 loss. 
D) $12,600 gain. 
E) $12,600 loss. 
A) $60,000 gain. 
B) $60,000 loss. 
C) $68,400 loss. 
D) $12,600 gain. 
E) $12,600 loss.

Question 19

When the cost of a short-term held-to-maturity debt security is different from the maturity value,the difference is amortized over the remaining life of the security.

Accepted Answer

A) True 
 B)False

Question 20

An investing company that owns more than ________ of another (investee)company's voting stock is presumed to have controlling influence over the investee.

Accepted Answer

The answer of An investing company that owns more than...

Exam 15: Investments and International Operations

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

Rosser 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.Rosser must record a:

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

When an investor company owns more than 25% of the voting stock of an investee company,it has a controlling influence.

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

A company had net income of $2,660,000,net sales of $25,000,000,and average total assets of $8,000,000.Its return on total assets equals:

Halam Company had the following transactions relating to investments in trading securities during the year.Prepare the required general journal entries for these transactions.

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

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

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

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

Seamark buys $300,000 of Eider's 8% five-year bonds payable at par value.Interest payments are made semiannually.Seamark plans to hold the bonds for the five year life.When the bonds mature,the journal entry to record the proceeds will be:

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

Investments can be classified as:

Bond sinking funds are examples of short-term investments.

Short-term investments in held-to-maturity debt securities are accounted for using the ______________________.

When the cost of a short-term held-to-maturity debt security is different from the maturity value,the difference is amortized over the remaining life of the security.

An investing company that owns more than ________ of another (investee)company's voting stock is presumed to have controlling influence over the investee.

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Completing the Accounting Cycle

Accounting for Merchandising Operations

Accounting Information Systems

Cash and Internal Controls

Accounting for Receivables

Plant Assets, natural Resources, and Intangibles

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Accounting for Corporations

Long-Term Liabilities

Reporting the Statement of Cash Flows

Analysis of Financial Statements

Managerial Accounting Concepts and Principles

Job Order Costing

Process Costing

Cost-Volume-Profit Analysis

Master Budgets and Planning

Flexible Budgets and Standard Costs

Performance Measurement and Responsibility Accounting

Capital Budgeting and Managerial Decisions

Time Value of Money B

Activity-Based Costing C

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