Exam 7: Investments and the Time Value of Money

On January 1,2016,Red Deer Corporation paid $360,000 to purchase 32% of the outstanding voting stock of English Court Corporation.The equity method is used to account for the investment.The following data relate to this investment. 2016 Prepare all journal entries for 2016 and 2017 relating to Red Deer Corporation's investment in English Court Corporation.

Prepare journal entries to record the following transactions associated with at fair value through other comprehensive income investments purchased by Spark Spread Corporation during 2015 Spark Spread Corporation had no investments prior to 2015. a.Purchased 1,500 shares of Mercury Coal Corporation common shares for $27.50 per share. b.Mercury Coal Corporation pays a $1.25 per share dividend to all common shareholders. c.On December 31,2015,the market price of Mercury Coal Corporation stock is $28.00 per share.

The investor should generally use the equity method of accounting for the investee if the investor owns what percentage of the outstanding stock of the investee?

Investments at fair value through other comprehensive income with a cost of $22,000 have a current market value of $22,600.The adjusting entry will require a:

When a premium on a bond investment is amortized by the company holding the investment:

Why is understanding the extent to which ATCO Ltd.influences another company important for accounting purposes? What impact does the degree of influence ATCO Ltd.has over another company have on accounting?

Under the equity method,the investor's share of dividends is treated as an increase in its investment.

A company that owns less than 20% of another company's stock must use the consolidation method of accounting.

On January 1,2016,bonds with a face value of $72,000 were sold.The bonds mature on January 1,2026.The face interest rate is 6%.The bonds pay interest semiannually on July 1 and January 1.The market rate of interest is 10%.What is the market price of the bonds? The present value of $1 for 20 periods at 5% is 0.377.The present value of an ordinary annuity of $1 for 20 periods at 5% is 12.462.The present value of $1 for 20 periods at 3% is 0.554.The present value of an ordinary annuity of $1 for 20 periods at 3% is 14.878.(Round your final answer to the nearest dollar.)

Briefly explain the meaning of the term "present value."

Short-term investments:

The parent and subsidiary relationship that is established in consolidation accounting is an example of the entity concept.

The future value of 1 will always be:

Under the equity method of accounting,the investor will:

What are consolidated financial statements? What are some of the benefits and limitations of them for ATCO Ltd.?

A non controlling interest will appear on the consolidated balance sheet when the parent company owns more than 40% but less than 100% of the subsidiary's stock.

Smart-T Corporation purchased an investment in April for $10,000.If Smart-T Corporation sold this investment on May 30^th for $12,000.They would have a realized gain.

On April 1,2016,Transportation Imbalance Company (TIC)purchased $5,000 of 6% bonds as a long-term investment to be held to maturity.TIC is a private corporation that elects to report its financial results in accordance with ASPE.Its year end is December 31 an Interest dates are April 1 and October 1.The bonds mature 36 months from the purchase date.The purchase price of the bonds was $5,120,and the premium is amortized on the straight-line basis.Assume the proper adjusting entry was made on December 31,2016,to record accrued interest receivable and amortization of the premium.The total interest revenue recorded by Transportation Imbalance Company on April 1,2017 will be:

If 100% of a subsidiary's voting stock is acquired in the purchase of the subsidiary,goodwill is defined as the amount by which the purchase price paid by the parent company exceeds the:

For a company that prepares its financial results in accordance with IFRS,a held to maturity bond investment must use the effective rate interest method.