Exam 15: Investments

A company reported net income of $225,000,net sales of $2,500,000,and average total assets of $2,100,000 for the current year.Calculate this company's profit margin,total asset turnover,and return on total assets.

Long-term investments in debt securities not classified as trading or held-to-maturity securities are classified as available-for-sale securities.

Discuss the reasons companies make investments.

Trading securities are:

Mire Corporation had the following transactions involving investments in trading securities during the year.Prior to these transactions,Mire had never had any investments in trading securities.Prepare the required general journal entries to record these transactions. Feb. 16 Purchased 800 shares of HM Corporation stock at \ 28 per share plus a \ 400 brokerage fee. Feb. 26 Purchased 500 shares of Sugarland Co. stock at \ 19 per share plus a \ 300 brokerage fee. Mar. 2 Received a \ 0.95 per share dividend from the HM Corporation. Mar. 28 Sold 200 shares of HM Corporation stock for \ 31 per share less a \ 150 brokerage fee. Apr. 20 Sold 150 shares of Sugarland Co. stock at \ 17 per share less a \ 100 brokerage fee. Apr. 30 The company is preparing quarterly financial statements, prepare an adjusting entry for the fair value adjustment on the trading securities. At April 30 , the HM stock has a fair value of \ 30 per share, and the Sugarland stock has a fair value

Select the correct statement from the following:

Kim Manufacturing purchased on credit £20,000 worth of parts from a British company when the exchange rate was $1.66 per British pound.At the year-end balance sheet date,the exchange rate increased to $1.69.Kim must record a gain of $600.

________ are investments in securities that are not readily convertible to cash,or are not intended to be converted to cash in the short-term.

On January 3,Kostansas Corporation purchased 5,000 shares of Morton,Inc.for $40 per share plus $700 in broker commissions.These shares represent a 40% ownership in Morton,Inc.Prepare the journal entry Kostansas Corporation should record for the receipt of cash dividends of $2 per share from Morton on July 10.

On January 4,Year 1,Barber Company purchased 5,000 shares of Convell Company for $59,500 plus a broker's fee of $1,000.Convell Company has a total of 25,000 shares of common stock outstanding and it is presumed the Barber Company will have a significant influence over Convell.During each of the next two years,Convell declared and paid cash dividends of $0.85 per share,and its net income was $72,000 and $67,000 for Year 1 and Year 2,respectively. -The January 12,Year 3,entry to record Barber's sale of 3,000 shares of Convell Company stock,which represents 60% of Barber's total investment,for $39,000 cash should be:

When using the equity method for investments in equity securities,the investor records the receipt of cash dividends as revenue.

________ are investments in securities that management intends to convert to cash within the longer of one year or the operating cycle,and are readily convertible to cash.

All of the following are true for Available-for-sale equity securities except:

Investments in trading securities:

Explain how transactions (both sales and purchases)in a foreign currency are recorded and reported.

Short-term investments in held-to-maturity debt securities are accounted for using the ________.

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 ________.

Comprehensive income refers to all changes in equity during a period except those from owners' investments and dividends.

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 when the bonds mature equal:

In the current year,Logic Co.purchased bonds of Waterford Co.with a cost of $125,000 and a year-end fair value of $123,700.Logic also purchased 1,500 shares of Jasper Co.common stock with a cost of $25,000 and a year-end fair value of $26,100.These are classified as long-term available-for-sale securities.Prepare the journal entry to record the market value of the investments as of its December 31 year-end.