Question 1

All of the following statements regarding stock investments with insignificant influence are true except for:

Accepted Answer

A) They are recorded at cost when acquired. 
B) They are valued at fair value. 
C) They report realized gain (or loss)in a permanent asset account,Fair Value Adjustment-Stock. 
D) They report any unrealized gain (or loss)in the income statement. 
E) They are adjusted to fair value at the end of each period. 
A) They are recorded at cost when acquired. 
B) They are valued at fair value. 
C) They report realized gain (or loss)in a permanent asset account,Fair Value Adjustment-Stock. 
D) They report any unrealized gain (or loss)in the income statement. 
E) They are adjusted to fair value at the end of each period.

Question 2

Cosmos Corporation had the following long-term investment transactions.
   Prepare the journal entries Cosmos Corporation should record for these transactions and events.

Accepted Answer

The answer of Cosmos Corporation had the following long-term investment...

Question 3

Mire Corporation had the following transactions involving stock investments with insignificant influence during the year.Prior to these transactions,Mire had never had any investments.Prepare the required journal entries to record these transactions.

Accepted Answer

The answer of Mire Corporation had the following transactions involving...

Question 4

Foreign exchange rates fluctuate due to many factors including changing political and economic conditions.

Accepted Answer

A) True 
 B)False

Question 5

Trading debt securities are always reported as current assets.

Accepted Answer

A) True 
 B)False

Question 6

When an investor company owns between 20% and 50% of the voting stock of an investee company,it has a controlling influence.

Accepted Answer

A) True 
 B)False

Question 7

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 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 January 12,Higgins should prepare the following journal entry:

Accepted Answer

A) Debit Cash $12,915; credit Accounts Receivable-Kagome $12,555; credit Foreign Exchange Gain $360. 
B) Debit Cash $12,555; debit Foreign Exchange Loss $360; credit Accounts Receivable-Kagome $12,915. 
C) Debit Cash $12,915; credit Accounts Receivable-Kagome $12,645; credit Foreign Exchange Gain $90. 
D) Debit Cash $12,645; debit Foreign Exchange Loss $90; credit Accounts Receivable-Kagome $12,915. 
E) Debit Cash $12,915; credit Accounts Receivable-Kagome $12,645; credit Foreign Exchange Gain $270. 
A) Debit Cash $12,915; credit Accounts Receivable-Kagome $12,555; credit Foreign Exchange Gain $360. 
B) Debit Cash $12,555; debit Foreign Exchange Loss $360; credit Accounts Receivable-Kagome $12,915. 
C) Debit Cash $12,915; credit Accounts Receivable-Kagome $12,645; credit Foreign Exchange Gain $90. 
D) Debit Cash $12,645; debit Foreign Exchange Loss $90; credit Accounts Receivable-Kagome $12,915. 
E) Debit Cash $12,915; credit Accounts Receivable-Kagome $12,645; credit Foreign Exchange Gain $270.

Question 8

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:

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 9

Barzetti had no investments prior to the current year.It had the following transactions during the year involving stock investments with insignificant influence and also held-to-maturity debt securities.Prepare Barzetti's journal entries to record the transactions and events associated with these investment purchases.

Accepted Answer

The answer of Barzetti had no investments prior to the...

Question 10

The price of one currency stated in terms of another currency is called a(n):

Accepted Answer

A) Foreign exchange rate. 
B) Currency transaction. 
C) Historical exchange rate. 
D) International conversion rate. 
E) Currency rate. 
A) Foreign exchange rate. 
B) Currency transaction. 
C) Historical exchange rate. 
D) International conversion rate. 
E) Currency rate.

Question 11

Carpark Services began operations in 20X1 and maintains long-term investments in available-for-sale debt securities.The year-end cost and fair values for its portfolio of debt securities follows.The year-end adjusting entry to record the unrealized gain/loss at December 31,20X2 is:

Accepted Answer

A) Debit Unrealized Gain - Equity $10,000; Credit Fair Value Adjustment - Available-for-Sale (LT)$10,000. 
B) Debit Fair Value Adjustment - Available-for-Sale (LT)$19,000; Credit Unrealized Loss - Equity $9,000; Credit Unrealized Gain - Equity,$10,000. 
C) Debit Fair Value Adjustment - Available-for-Sale (LT)$10,000; Credit Unrealized Gain - Equity,$10,000. 
D) Debit Fair Value Adjustment - Available-for-Sale (LT)$10,000; Credit Unrealized Loss - Equity $10,000. 
E) Debit Fair Value Adjustment - Available-for-Sale (LT)$19,000; Credit Unrealized Gain - Equity $19,000. 
A) Debit Unrealized Gain - Equity $10,000; Credit Fair Value Adjustment - Available-for-Sale (LT)$10,000. 
B) Debit Fair Value Adjustment - Available-for-Sale (LT)$19,000; Credit Unrealized Loss - Equity $9,000; Credit Unrealized Gain - Equity,$10,000. 
C) Debit Fair Value Adjustment - Available-for-Sale (LT)$10,000; Credit Unrealized Gain - Equity,$10,000. 
D) Debit Fair Value Adjustment - Available-for-Sale (LT)$10,000; Credit Unrealized Loss - Equity $10,000. 
E) Debit Fair Value Adjustment - Available-for-Sale (LT)$19,000; Credit Unrealized Gain - Equity $19,000.

Question 12

If a company owns more than 20% of the stock of another company and the stock is being held as a long-term investment,which method would the investor normally use to account for this investment?

Accepted Answer

A) Equity method. 
B) Fair value method. 
C) Historical cost method. 
D) Cost with amortization method. 
E) Effective method. 
A) Equity method. 
B) Fair value method. 
C) Historical cost method. 
D) Cost with amortization method. 
E) Effective method.

Question 13

A company paid $37,800 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 when the bonds mature equal:

Accepted Answer

A) $37,800. 
B) $38,325. 
C) $40,000. 
D) $40,525. 
E) $43,200. 
A) $37,800. 
B) $38,325. 
C) $40,000. 
D) $40,525. 
E) $43,200.

Question 14

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 15

Long-term investments:

Accepted Answer

A) Are current assets. 
B) Can include funds designated for a special purpose,or investments in land not used in the company's operations. 
C) Must be readily convertible to cash. 
D) Are expected to be converted into cash within one year. 
E) Include only equity securities. 
A) Are current assets. 
B) Can include funds designated for a special purpose,or investments in land not used in the company's operations. 
C) Must be readily convertible to cash. 
D) Are expected to be converted into cash within one year. 
E) Include only equity securities.

Question 16

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.

Accepted Answer

A) True 
 B)False

Question 17

A company had net income of $40,000,net sales of $300,000,and average total assets of $200,000.Its profit margin and total asset turnover were respectively:

Accepted Answer

A) 13.3%; 0.2. 
B) 13.3%; 1.5. 
C) 2.0%; 1.5. 
D) 1.5%; 0.2. 
E) 1.5%; 13.3. 
A) 13.3%; 0.2. 
B) 13.3%; 1.5. 
C) 2.0%; 1.5. 
D) 1.5%; 0.2. 
E) 1.5%; 13.3.

Question 18

Explain how to record the sale of trading securities.

Accepted Answer

When trading securities are sold,the dif

Question 19

Held-to-maturity securities are equity securities a company intends to hold until dividends have been paid.

Accepted Answer

A) True 
 B)False

Question 20

Short-term investments include:

Accepted Answer

A) Securities that management intends to convert to cash within the longer of one year or the current operating cycle,and are readily convertible to cash. 
B) Funds earmarked for a special purpose such as bond sinking funds. 
C) Stocks not intended to be converted into cash. 
D) Bonds not intended to be converted into cash. 
E) Sinking funds not intended to be converted into cash. 
A) Securities that management intends to convert to cash within the longer of one year or the current operating cycle,and are readily convertible to cash. 
B) Funds earmarked for a special purpose such as bond sinking funds. 
C) Stocks not intended to be converted into cash. 
D) Bonds not intended to be converted into cash. 
E) Sinking funds not intended to be converted into cash.

Exam 26: Investments

All of the following statements regarding stock investments with insignificant influence are true except for:

Cosmos Corporation had the following long-term investment transactions. Prepare the journal entries Cosmos Corporation should record for these transactions and events.

Mire Corporation had the following transactions involving stock investments with insignificant influence during the year.Prior to these transactions,Mire had never had any investments.Prepare the required journal entries to record these transactions.

Foreign exchange rates fluctuate due to many factors including changing political and economic conditions.

Trading debt securities are always reported as current assets.

When an investor company owns between 20% and 50% of the voting stock of an investee company,it has a controlling influence.

The price of one currency stated in terms of another currency is called a(n):

Carpark Services began operations in 20X1 and maintains long-term investments in available-for-sale debt securities.The year-end cost and fair values for its portfolio of debt securities follows.The year-end adjusting entry to record the unrealized gain/loss at December 31,20X2 is:

If a company owns more than 20% of the stock of another company and the stock is being held as a long-term investment,which method would the investor normally use to account for this investment?

A company paid $37,800 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 when the bonds mature equal:

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.

Long-term investments:

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 had net income of $40,000,net sales of $300,000,and average total assets of $200,000.Its profit margin and total asset turnover were respectively:

Explain how to record the sale of trading securities.

Held-to-maturity securities are equity securities a company intends to hold until dividends have been paid.

Short-term investments include:

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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