Exam 8: Long-Term Investments: The Time Value of Money

A company that owns less than 20% of another company's stock may not use the consolidation method of accounting.

The Unrealized Gain on Investment in Available-for-Sale Securities is reported in:

On January 1,2015,Barry Corporation paid $800,000 for 100,000 shares of Oak Company's common stock,which represents 40% of Oak's outstanding common stock.For the year ending December 31,2015,Oak reported net income of $200,000 and paid cash dividends of $60,000.Barry should report the investment in Oak Company on its balance sheet at December 31,2015 at:

When the equity method is used to account for stock investments,the carrying value of an investment is the fair value as of the balance sheet date.

Other comprehensive income:

Parent Company acquired a subsidiary in Germany in 2009.The subsidiary's balance sheet is stated in euros.When Parent Company acquired the subsidiary in 2009,a euro was worth $1.35.When the subsidiary earned its income during 2009-2014,the average exchange rate was $1.32.On December 31,2014,a euro is worth $1.20. At December 31,2014,the subsidiary's assets were 1,000,000 euros; the liabilities were 500,000 euros,common stock was 400,000 euros and retained earnings was 100,000 euros. Required: Translate the subsidiary's balance sheet into dollars.

All of the following are necessary to compute the future value of a single amount EXCEPT the:

When an investor owns 35% of the stock of another business,cash dividends received from the investee company are recorded by decreasing the Equity-Method Investment account.

On January 1,2015,Brooklyn Company purchases $100,000,6% bonds at a price of 95 and a maturity date of January 1,2025.Brooklyn Company intends to hold the bonds until maturity.Interest is paid semiannually,on January 1 and July 1.Brooklyn Company has a calendar year end.The adjusting entry to amortize the bond investment on December 31,2015 is:

On the purchase date,long-term available-for-sale equity securities are reported on the balance sheet at:

If the market interest rate is greater than the coupon rate of interest on a bond,the bond will sell at a discount.

On each balance sheet after the purchase date,long-term available-for-sale investments in stock are reported at:

On January 1,2014,a company purchased long-term available-for-sale securities in one company.The cost was $100,000 and the investor owns 5% of the outstanding common stock of the investee.The investor does not use an allowance account to adjust the investment.At December 31,2014,the fair value of the investment is $97,000.What journal entry is needed on December 31,2014?

On January 1,2014,Rod Corporation purchased 35% of the outstanding stock of Alamo Corporation for $500,000.Net income reported by Alamo for 2014 was $200,000.Dividends paid by Alamo during 2014 were $40,000.The amount of investment revenue that Rod should recognize for 2014 is:

A single amount of $5,000 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 one for 3 periods at 6% is 0.84.The present value of an ordinary annuity of one for 3 periods at 6% is 2.673.

The Allowance to Adjust Investment in Available-for-Sale Securities to Market account will always have a debit balance.

Realized gains on the sale of long-term available-for-sale securities are reported as other comprehensive income on the Statement of Comprehensive Income.

Under the equity method,the investor applies his percentage of ownership in recording his share of the investee's net income,but not dividends.

The available-for-sale(fair value)method of accounting for long-term investments in stock should be used when the:

The cash received when selling the investment in another company is reported on the statement of cash flows as a(n):