Exam 15: Investments and International Operations

As a long-term investment,Elmer's Equipment Enterprise purchased 20% of Sticky Supplies Inc.'s 300,000 shares for $350,000 at the beginning of the fiscal year of both companies.On the purchase date,the fair value and book value of Sticky's net assets were equal.During the year,Sticky's earned net income of $430,000 and distributed cash dividends of 0.42 cents per share.The fair value of Sticky's assets at the end of the year totaled $349,450.What is Elmer's balance for this investment at the end of the year,assuming there is no significant control?

A company owns $400,000 of 7% bonds that pay interest on October 1 and April 1.The amount of interest accrued on December 31 (the company's year-end) would be:

Return on total assets is computed by dividing ___________ by __________.

Profit margin is calculated by sales divided by net income.

Long-term investments are usually held as an investment of cash for the use of current operations.

____________________________ are debt and equity securities that a company intends to actively manage and trade for a profit.

A company paid $37,800 plus a broker's fee of $525 to acquire 8% bonds with a $40,000 maturity value.The company intends to hold the bonds to maturity.The cash proceeds the company will receive upon the maturity of the bond is:

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:

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

Long-term investments include:

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

A company had net income of $45,000,net sales of $390,000,and average total assets of $250,000 for the current year.Calculate this company's profit margin,total asset turnover,and return on total assets.

The controlling investor is referred to as the:

A company's return on total assets equals 30%.If net income and net sales are $900,000 and $8,900,000 respectively,what is the amount of total assets?

Consolidated financial statements:

On May 15,Briar Company purchased 10,000 shares of Broder Corp.for $80,000 for its available-for-sale securities portfolio.On September 30,the stock had a market value of $85,000.The $5,000 difference must be reported on the income statement as a $5,000 gain.

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

Bond sinking funds are examples of short-term investments.

On April 1 of the current year,a company paid $150,000 to purchase 7%,10-year bonds that had a par value of $150,000 and paid interest semiannually each April 1 and October 1.The company intends to hold the bonds until they mature.Prepare the journal entry to record the receipt of the first semiannual interest payment on October 1 of the current year.

Any unrealized gain or loss on available-for-sale securities is reported on the income statement in the other gain or loss section.