Exam 7: Investments and the Time Value of Money

Vance Corporation purchases UXB shares on May 10 for $120,000.On October 15^th Vance receives a cash dividend of $1,200 from UXB.On December 31^st the value of Vance Corporation's investment in UXB has increased in value to $150,000. Prepare journal entries needed on May 10,October 15,and December 31,2014.

The amount paid to purchase all the outstanding shares of a subsidiary company is added to the existing assets of that subsidiary.

The DEML Corporation reported the following transactions for the year 2016: This is a long-term investment giving DEML significant influence over the operations of Utilities Board. Prepare journal entries to record all the above events for the DEML Corporation.

Amortizing a discount on a long-term bond investment will cause:

January 1,2016 Orange Tree Spa invests in $100,000 worth of Apple Spa shares to hold as a short term investment.On December 31,2016,this investment now has a market value of $105,000. On May 1,2017 Orange Tree Spa sells their Apple Spa shares for $95,000.Prepare the required entries for Orange Tree Spa.

The equity method of accounting for a stock investment should generally be used when the investor owns 20%-50% of the investee's stock,because that level of stock ownership:

A controlling interest is normally one where the investor:

Investments with a cost of $12,000 have a current market value of $11,612.The adjusting entry will require a:

A single amount of $4,700 is to be received in 3 years.If the single amount is discounted at 6% for 3 periods,the present value is ________.The present value of $1 for 3 periods at 6% is 0.840.The present value of an ordinary annuity of $1 for 3 periods at 6% is 2.673.(Round your final answer to the nearest dollar.)

Energy Direct Corp.acquired 32% of Edmonton Limited for $2,000,000 on January 1,2017.During 2017,Edmonton Limited earned $480,000 and paid dividends of $225,000. a.Prepare the journal entries required to record the acquisition,and the transactions during 2017. b.Determine the carrying value on Energy Direct Corp.of the investment in Edmonton Limited as at December 31,2017.

All marketable securities are considered to be short-term investments.

Long-term bond investments are reported on the balance sheet at their:

On January 1,2016,TXU Europe Corporation purchased 40% of the outstanding stock of Alberta Power Pool Corporation for $800,000.Net income reported by Alberta Power Pool Corporation for 2016 and 2017 was,respectively,$100,000 and $125,000.Dividends paid by Alberta Power Pool Corporation during 2016 and 2017 were,respectively,$60,000 and $75,000.The long-term investment will appear on TXU Europe Corporation's December 31,2016,balance sheet at:

The sale of a long-term investment would appear on a cash flow statement as a:

In present value calculations,the process of determining the present value of a single sum of money is called:

In 2017,Gigajoule Corporation used the equity method to account for a 25% ownership interest in Megawatt Corporation.If Megawatt Corporation reports $400,000 of income and pays $80,000 of dividends in 2017,the net effect of the entries made by Gigajoule Corporation in 2017 will be to:

PET Corporation purchased 225,000 shares of SOX Corporation on January 1,2017,for $540,000.SOX Corporation has 600,000 shares outstanding.SOX Corporation earned net income of $360,000 and paid dividends of $106,000 during 2017. Required: a.What method should be used to account for the SOX Corporation investment? b.How much revenue will be recorded by PET Corporation in 2015 from its investment in SOX Corporation? c.What is the balance in PET's investment account at the end of 2015? d.Assume all of the above facts except that on January 1,2015,PET Corporation purchased 90,000 shares of SOX Corporation.How much revenue will be recorded by PET Corporation in 2015 from its investment in SOX Corporation?

Barking Power Corporation acquired 80% of the voting common shares of Brighton Beach Corporation on December 31,2016.During the year ended December 31,2017,Barking Power Corporation and Brighton Beach Corporation reported net income of $110,000 and $75,000 from their own operations,respectively. a.How much income attributable to the equity holders of the parent corporation will be reported on the consolidated income statement for the year ended December 31,2017? b.Discuss the way in which non-controlling interests in the subsidiary might be presented on consolidated financial statements.What exactly does non-controlling interest represent?

On May 1,2016,Gigajoule Company paid $180,000 to purchase $200,000 of bonds that carry a 5% contract rate of interest and will mature in 5 years from the date of purchase.Interest on the bonds is paid May 1 and November 1 of each year.Gigajoule Company is a private company that prepares its financial statements in accordance with ASPE.It plans to hold the bonds until maturity and amortizes the premium or discount on bonds using the straight-line method each interest payment date.As of December 31,2016,the bonds had a market value of $185,000. a.Prepare all necessary journal entries for 2016 dealing with the investment in bonds. b.Show how the bonds would be presented on the balance sheet dated December 31,2016.

On January 1,2013 Blue Cat Corporation purchased 1,000 shares (5%)of Mike Mouse Co.for $10,000 as a long term investment.On March 31,2014 Mike Mouse pays Blue Cat a $5,000 dividend.At year end December 31,2014 Mike Mouse shares are trading at $12 per share.Blue Cat then sells their investment in Mike Mouse Co for $11,500 on February 4,2015.Prepare Blue Cat's journal entries for 2013,2014 and 2015.