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

On January 1,2015,Carmody Corporation purchased 5% bonds with a face value of $40,000 for $42,000.Carmody Corporation intends to hold the bonds until the maturity date.Interest is paid semiannually on January 1 and July 1.The journal entry on January 1,2015 is:

On January 1,2015,Benson Company purchases $100,000,6% bonds at a price of 95 and a maturity date of January 1,2020.Benson Company plans to hold the bonds until their maturity date.Interest is paid semiannually,on January 1 and July 1.Benson Company has a calendar year end.The adjusting entry on December 31,2015 is:

An investor receives a stock dividend on a long-term Investment in Available-for-Sale Securities.What journal entry is required?

On January 1,2014,Conner Corporation purchased 70,000 of the 210,000 shares of outstanding stock of JJ Company for $600,000.Net income reported by JJ Company for 2014 was $600,000.Dividends paid by JJ Company during 2014 were $150,000.The Equity-Method Investment will be reported on Conner Corporation's December 31,2014 balance sheet in the amount of:

Seider Company receives a stock dividend of 100 shares from Dolhun Company.Seider previously owned 750 shares of Dolhun stock that had a cost of $4,800.After the stock dividend,the cost per share of Dolhun stock is now:

On January 1,2014,bonds with a face value of $100,000 were sold.The bonds mature on January 1,2024.The stated rate of interest is 9% annually.The bonds pay interest semiannually on July 1 and January 1.The market rate of interest is 10% annually.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 10 periods at 10% is 0.386.The present value of an ordinary annuity of $1 for 10 periods at 10% is 6.145.

On January 1,2014,Jude Corporation purchases stock in Gelco Company.Jude Corporation owns 1% of the outstanding stock of Gelco Company.Jude Corporation intends to hold the stock for longer than one year.How should Jude Corporation classify this stock?

When an investor owns between 20% and 50% of the outstanding stock of another company,the ________ method is used to account for the stock investment.

Long-term available-for-sale investments are adjusted to fair value at the end of each accounting period.

Under the equity method,the Equity-Method Investment account is debited when the:

Consolidated financial statements are prepared for:

An investor receives a stock dividend from a long-term available-for-sale investment.Which journal entry is required?

How does the receipt of a cash dividend on a long-term Investment in Available-for-Sale Securities affect the balance sheet?

When we translate a foreign subsidiary's balance sheet into U.S.dollars,we calculate a:

On January 1,2014,Winston Company purchased 6% bonds with a face value of $50,000 for par.Winston Company intends to hold the bonds until maturity.Interest is payable semiannually on July 1 and January 1.The company's fiscal year ends on December 31.The journal entry on December 31,2014 is:

Cash dividends received on stock investments with less than 20% ownership of the investee should be credited to the Investment in Available-for-Sale Securities account.

The market prices of bonds fluctuate inversely with market interest rates.

Daniel Company purchased 30% of the outstanding shares of Clooney Corporation on January 1 at a cost of $600,000.Clooney Corporation reported net income of $95,000 and paid total dividends of $25,000 for the year.At the end of the year,Clooney shares had a current fair value of $590,000.After all necessary adjusting entries are made for the year,the balance in Daniel Company's Equity-Method Investment account will be:

Investments accounted for by the equity method are initially recorded at cost.

The cash received on the sale of a held-to-maturity investment in bonds is reported on the statement of cash flows as: