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

On January 1,2015,Carmello Corporation purchased 5% bonds with a face value of $50,000 for $42,000.Carmello Corporation intends to hold the bonds until the maturity date of January 1,2025.Interest is paid semiannually on January 1 and July 1.What journal entry(ies)is(are)prepared on July 1,2015?

An investor who owns 25% of the outstanding stock of another company should report the investment using the:

Long-term available-for-sale securities can be:

An investor purchased bonds and intends to hold them until the maturity date which is 10 years into the future.The bonds were purchased at a discount.One year after purchase,this Held-to-Maturity Investment in Bonds will be reported at ________ on the balance sheet.

Milton Company owns 30% interest in the stock of Darcy Corporation.During the year,Darcy pays $20,000 in dividends to Milton,and reports $100,000 in net income.Milton Company will report Equity-Method Investment Revenue of:

The balancing figure that brings the dollar amount of the total liabilities and stockholders' equity of the foreign subsidiary into agreement with the dollar amount of its total assets is the:

Desidero Corporation acquired 100% of the common stock of Basile Company for $170,000.On the date of acquisition,Basile Company's stockholders' equity consisted of: Common Stock,$100,000 and Retained Earnings,$70,000.On the date of the acquisition,Desidero Company's stockholders' equity consisted of: Common Stock $500,000 and Retained Earnings $1,000,000.On the acquisition date,the elimination entry to be made on a worksheet to prepare a consolidated balance sheet would include a:

The consolidation method of accounting is appropriate when an investor controls an investee by ownership of more than 50% of the investee's common stock.

Santa Barbara Company purchased merchandise on account from a company in England.The price was 1,000 pounds.At the time of the purchase,the exchange rate for a pound was $1.52.At the time Santa Barbara Company paid for the merchandise,the exchange rate for a pound was $1.55.What is the amount of the gain or loss recorded by the Santa Barbara Company upon payment?

Long-term available-for-sale investments in stock are reported on the balance sheet at cost.

Under the equity method,if the investee company has a net loss,then the investor company will:

Which method is used when one company owns less than 20% of the shares of another company?

Acme Company owns 35% of Superior Company.Superior Company paid $35,000 cash dividends for the year.Acme Company's journal entry to record the dividends includes 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 July 1,2014 is:

On January 1,2014,Walker Company pays $10 million for 40% of the outstanding common stock of a supplier called Dorglass,Inc.On December 1,2014,Dorglass,Inc.,declared and paid cash dividends of $100,000.For the year ending December 31,2014,Dorglass,Inc.also reported net income of $1,000,000.At December 31,2014,the fair value of 40% of Dorglass,Inc.'s stock was $9 million.On January 1,2015,all the Dorglass,Inc.'s stock was sold for $9 million. Required: Prepare journal entries on the following dates: 1.January 1,2014 2.December 1,2014 3.December 31,2014 4.January 1,2015 Explanations are not required.

On January 1,2014,Imagine Corporation purchases bonds in Berkeley Company.The bonds mature on January 1,2024.Imagine Corporation intends to hold the bonds longer than one year but not until the maturity date.How should Imagine Corporation classify these bonds?

The equity method is used to account for stock investments in which the investor company owns less than 20% of the outstanding stock of the investee.

On January 1,2015,Centre Company purchases $100,000,6% bonds at a price of 95 and a maturity date of January 1,2025.Centre Company intends to hold the bonds until the maturity date.Interest is paid semiannually,on January 1 and July 1.Centre Company has a calendar year end.The journal entry on January 1,2016 is:

The gain or loss on the sale of an investment classified as a long-term available-for-sale-security is calculated by comparing the ________ of the investment with the ________ of the investment.

The equity method of accounting for a stock investment should generally be used when the investor owns a level of stock ownership that: