Question 1

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

Accepted Answer

A) True 
 B)False  True

Question 2

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 profit margin equals 7.5%.

Accepted Answer

A) True 
 B)False  True

Question 3

Long-term investments include:

Accepted Answer

A) Investments that are not readily convertible to cash or not intended to be converted to cash in the short term. 
B) Investments in marketable stocks that are intended to be converted into cash in the short-term. 
C) Investments in marketable bonds that are intended to be converted into cash in the short-term. 
D) Only investments readily convertible to cash. 
E) Investments intended to be converted to cash within one year. 
A) Investments that are not readily convertible to cash or not intended to be converted to cash in the short term. 
B) Investments in marketable stocks that are intended to be converted into cash in the short-term. 
C) Investments in marketable bonds that are intended to be converted into cash in the short-term. 
D) Only investments readily convertible to cash. 
E) Investments intended to be converted to cash within one year. A

Question 4

On November 12,Higgins,Inc.,a U.S.Company,sold merchandise on credit to Kagome of Japan at a price of 1,500,000 yen.The exchange rate was $0.00837 per yen on the date of sale.On December 31,when Higgins prepared its financial statements,the exchange rate was $0.00843.Kagome paid in full on January 12,when the exchange rate was $0.00861.On December 31,Higgins should prepare the following journal entry:

Accepted Answer

A) Debit Sales $90; credit Foreign Exchange Gain $90. 
B) Debit Foreign Exchange Loss $90; credit Sales $90. 
C) Debit Accounts Receivable-Kagome $90; credit Foreign Exchange Gain $90. 
D) Debit Foreign Exchange Loss $90; Accounts Receivable-Kagome $90. 
E) No journal entry is required until the amount is collected. 
A) Debit Sales $90; credit Foreign Exchange Gain $90. 
B) Debit Foreign Exchange Loss $90; credit Sales $90. 
C) Debit Accounts Receivable-Kagome $90; credit Foreign Exchange Gain $90. 
D) Debit Foreign Exchange Loss $90; Accounts Receivable-Kagome $90. 
E) No journal entry is required until the amount is collected.

Question 5

Investments in equity securities where the investor has a controlling influence are accounted for using the ________.

Accepted Answer

consolidat

Question 6

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:

Accepted Answer

A) Of sale using a projected estimate of the U.S.dollar value at payment date. 
B) Of sale using a 30-day average U.S.dollar value. 
C) Of sale using the current dollar value. 
D) Of sale using the foreign currency value. 
E) When payment is received. 
A) Of sale using a projected estimate of the U.S.dollar value at payment date. 
B) Of sale using a 30-day average U.S.dollar value. 
C) Of sale using the current dollar value. 
D) Of sale using the foreign currency value. 
E) When payment is received.

Question 7

Strickland Corporation has invested in debt securities.Strickland intends to actively buy and sell this investment for profit.This investment is classified as:

Accepted Answer

A) an available-for-sale security. 
B) a held-to-maturity security. 
C) a trading security. 
D) a significant influence security. 
E) a controlling influence security. 
A) an available-for-sale security. 
B) a held-to-maturity security. 
C) a trading security. 
D) a significant influence security. 
E) a controlling influence security.

Question 8

If a U.S.company makes a credit sale to a foreign company,the sales price must be translated into dollars as of the date of ________.

Accepted Answer

The answer of If a U.S.company makes a credit sale...

Question 9

Investments can be classified as all but which of the following:

Accepted Answer

A) Intangible investments. 
B) Held-to-maturity debt securities. 
C) Available-for-sale debt securities. 
D) Stock investments with insignificant influence. 
E) Trading debt securities. 
A) Intangible investments. 
B) Held-to-maturity debt securities. 
C) Available-for-sale debt securities. 
D) Stock investments with insignificant influence. 
E) Trading debt securities.

Question 10

On January 2,Froxel Company purchased 10,000 shares of Sandia Corp.common stock at $19 per share.This represents 30% of Sandia Corp.'s outstanding stock.On August 6,Sandia Corp.declared and paid cash dividends of $1.75 per share,and on December 31 it reported net income of $150,000.Prepare the necessary entries for Froxel to account for these transactions and events.

Accepted Answer

The answer of On January 2,Froxel Company purchased 10,000 shares...

Question 11

Maroon Company sold supplies in the amount of €15,000 (euros)to a French company when the exchange rate was $1.15 per euro.At the time of payment,the exchange rate decreased to $1.12.Maroon must record a loss of $450.

Accepted Answer

A) True 
 B)False

Question 12

All of the following statements regarding accounting for equity investments with controlling influence are true except:

Accepted Answer

A) These investments are accounted for using fair values with unrealized gains and losses reported in other comprehensive income. 
B) The parent uses the consolidation method. 
C) The controlling investor is called the parent. 
D) Consolidated financial statements show the financial statements of all entities under the parent's control,including all subsidiaries. 
E) An investor who owns more than 50% of a company's voting stock has control over the investee. 
A) These investments are accounted for using fair values with unrealized gains and losses reported in other comprehensive income. 
B) The parent uses the consolidation method. 
C) The controlling investor is called the parent. 
D) Consolidated financial statements show the financial statements of all entities under the parent's control,including all subsidiaries. 
E) An investor who owns more than 50% of a company's voting stock has control over the investee.

Question 13

Kendall Corp.purchased at par value,$160,000 of Barker Company's 7% bonds that mature in 10 months.The bonds pay interest semiannually on June 1 and December 1.Kendall plans to hold the bonds until they mature.The journal entry to record Kendall's purchase of the bonds is:

Accepted Answer

A) debit Debt Investments-HTM $160,000; credit Cash,$160,000. 
B) debit Cash,$169,333; credit,Short-Term Investments-HTM $169,333. 
C) debit Cash,$160,000; credit Short-Term Investments-HTM $160,000. 
D) debit Long-Term Investments-HTM $160,000; credit Cash $160,000. 
E) debit Cash,$160,000; credit Long-Term Investments-HTM $160,000. 
A) debit Debt Investments-HTM $160,000; credit Cash,$160,000. 
B) debit Cash,$169,333; credit,Short-Term Investments-HTM $169,333. 
C) debit Cash,$160,000; credit Short-Term Investments-HTM $160,000. 
D) debit Long-Term Investments-HTM $160,000; credit Cash $160,000. 
E) debit Cash,$160,000; credit Long-Term Investments-HTM $160,000.

Question 14

Six months ago,a company purchased stock investments with insignificant influence for $70,000.This is the company's first and only purchase of stock.The current year-end fair value of the stock is $68,500.The company should record a:

Accepted Answer

A) Debit to Unrealized Loss-Income for $1,500. 
B) Debit to Unrealized Gain-Equity for $1,500. 
C) Debit to Investment Revenue for $1,500. 
D) Credit to Dividend Revenue for $1,500. 
E) Credit to Investment Revenue for $1,500. 
A) Debit to Unrealized Loss-Income for $1,500. 
B) Debit to Unrealized Gain-Equity for $1,500. 
C) Debit to Investment Revenue for $1,500. 
D) Credit to Dividend Revenue for $1,500. 
E) Credit to Investment Revenue for $1,500.

Question 15

On January 1,Year 1,Rickson Corporation purchased 7,500 shares of AutoTech as an equity method investment for a total of $235,000.The 7,500 shares represent 30% of the outstanding (25,000)shares of AutoTech.Prepare the journal entries for Rickson to record the following transactions and events:

Accepted Answer

The answer of On January 1,Year 1,Rickson Corporation purchased 7,500...

Question 16

Lessington Corporation purchases 4,000 shares of Gonzalez Company common stock for $150,000 cash.Gonzalez has 500,000 shares of stock currently outstanding.Lessington's entry to record the purchase would include a:

Accepted Answer

A) Debit to Stock Investments for $150,000. 
B) Credit to Common Stock for $150,000. 
C) Credit Equity Method Investment $150,000. 
D) Debit to Long-Term Investments-AFS for $150,000. 
E) Debit to Equity Method Investment for $150,000. 
A) Debit to Stock Investments for $150,000. 
B) Credit to Common Stock for $150,000. 
C) Credit Equity Method Investment $150,000. 
D) Debit to Long-Term Investments-AFS for $150,000. 
E) Debit to Equity Method Investment for $150,000.

Question 17

Available-for-sale securities are reported at fair value on the balance sheet.

Accepted Answer

A) True 
 B)False

Question 18

Arkansana Inc.imports inventory from Costa Rica.Prepare the journal entries for Arkansana to record the following transactions.Include any year-end adjustments.

Accepted Answer

The answer of Arkansana Inc.imports inventory from Costa Rica.Prepare the...

Question 19

Landmark Corp.buys $300,000 of Schroeter Company's 8%,5-year bonds payable,at par value on September 1.Interest payments are made semiannually.Landmark plans to hold the bonds for the 5-year life.The journal entry to record the purchase should include:

Accepted Answer

A) A debit to Debt Investments-AFS $300,000. 
B) A debit to Debt Investments-Trading $300,000. 
C) A debit to Debt Investments-HTM $300,000. 
D) A debit to Stock Investments-HTM $300,000. 
E) A debit to Cash $300,000. 
A) A debit to Debt Investments-AFS $300,000. 
B) A debit to Debt Investments-Trading $300,000. 
C) A debit to Debt Investments-HTM $300,000. 
D) A debit to Stock Investments-HTM $300,000. 
E) A debit to Cash $300,000.

Question 20

What are the accounting basics for equity securities,including classification and accounting method?

Accepted Answer

At acquisition,equity securities are rec

Exam 26: Investments

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

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 profit margin equals 7.5%.

Long-term investments include:

Investments in equity securities where the investor has a controlling influence are accounted for using the ________.

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:

Strickland Corporation has invested in debt securities.Strickland intends to actively buy and sell this investment for profit.This investment is classified as:

If a U.S.company makes a credit sale to a foreign company,the sales price must be translated into dollars as of the date of ________.

Investments can be classified as all but which of the following:

Maroon Company sold supplies in the amount of €15,000 (euros)to a French company when the exchange rate was $1.15 per euro.At the time of payment,the exchange rate decreased to $1.12.Maroon must record a loss of $450.

All of the following statements regarding accounting for equity investments with controlling influence are true except:

Kendall Corp.purchased at par value,$160,000 of Barker Company's 7% bonds that mature in 10 months.The bonds pay interest semiannually on June 1 and December 1.Kendall plans to hold the bonds until they mature.The journal entry to record Kendall's purchase of the bonds is:

Six months ago,a company purchased stock investments with insignificant influence for $70,000.This is the company's first and only purchase of stock.The current year-end fair value of the stock is $68,500.The company should record a:

On January 1,Year 1,Rickson Corporation purchased 7,500 shares of AutoTech as an equity method investment for a total of $235,000.The 7,500 shares represent 30% of the outstanding (25,000)shares of AutoTech.Prepare the journal entries for Rickson to record the following transactions and events:

Lessington Corporation purchases 4,000 shares of Gonzalez Company common stock for $150,000 cash.Gonzalez has 500,000 shares of stock currently outstanding.Lessington's entry to record the purchase would include a:

Available-for-sale securities are reported at fair value on the balance sheet.

Arkansana Inc.imports inventory from Costa Rica.Prepare the journal entries for Arkansana to record the following transactions.Include any year-end adjustments.

Landmark Corp.buys $300,000 of Schroeter Company's 8%,5-year bonds payable,at par value on September 1.Interest payments are made semiannually.Landmark plans to hold the bonds for the 5-year life.The journal entry to record the purchase should include:

What are the accounting basics for equity securities,including classification and accounting method?

Accounting in Business

Accounting for Business Transactions

Adjusting Accounts for Financial Statements

Accounting for Merchandising Operations

Inventories and Cost of Sales

Cash,fraud,and Internal Controls

Accounting for Receivables

Accounting for Long-Term Assets

Accounting for Current Liabilities

Accounting for Long-Term Liabilities

Corporate Reporting and Analysis

Reporting Cash Flows

Analysis of Financial Statements

Managerial Accounting Concepts and Principles

Job Order Costing and Analysis

Process Costing and Analysis

Activity-Based Costing and Analysis

Cost Behavior and Cost-Volume-Profit Analysis

Variable Costing and Analysis

Master Budgets and Performance Planning

Flexible Budgets and Standard Costs

Performance Measurement and Responsibility Accounting

Relevant Costing for Managerial Decisions

Capital Budgeting and Investment Analysis

Time Value of Money

Lean Principles and Accounting

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