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

A consolidated balance sheet will NOT report:

Bond investments are initially recorded at cost.

If an investor owns between 20% and 50% of an investee's voting stock,it is assumed that the investor has significant influence over the investee.

An investor should report securities that he or she intends to sell in the next 12 months,and that are liquid,as a current asset.

Noncontrolling Interest is reported in the:

Cash proceeds from the sale of available-for-sale investments is reported as an investing activity on the Consolidated Statement of Cash Flows.

If an investor owns less than 20% of the common stock of another company as a long-term investment:

If the equity method is used to account for a long-term investment in common stock,cash dividends received from the investee are recorded by the investor as:

Why are consolidated financial statements prepared?

If $100,000 face value bonds are issued at 103,the bonds are selling for $103,000.

Unrealized Gain on Investment in Available-for-Sale Securities is reported as other comprehensive income on a Statement of Comprehensive Income.

Under the equity method,when the investee reports net income,the Equity-Method Investment account increases.

On a worksheet for a consolidated balance sheet,one elimination entry:

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 8%.The bonds pay interest semiannually on July 1 and January 1.The market rate of interest is 10%.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 20 periods at 4% is 0.456.The present value of an ordinary annuity of $1 for 20 periods at 4% is 13.59.

The future value of 1 will always be:

Purdue Company had the following transactions pertaining to stock investments: a.February 1,Purchased 3,000 shares of Hudson Company (10% ownership)at the market price of $17 per share.Purdue Company intends to keep the stock for more than one year and classifies the stock as available-for-sale. B.June 1,Received cash dividends of $6,000 on Hudson Company stock. C.October 1,Sold 3,000 shares of Hudson stock for $54,000. The journal entry to record the purchase of the Hudson stock is:

Santa Ana 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 Ana Company paid for the merchandise,the exchange rate for a pound was $1.55.What can we say about the pound relative to the U.S.dollar?

On January 1,2014,Benson Corporation paid $800,000 to purchase 40% of the outstanding stock of Kroger Company.Kroger Company reported net income of $200,000 for the year ending December 31,2014 and paid cash dividends of $60,000 during 2014.On January 1,2015,Benson Corporation sells its entire investment in Kroger Company for $1,100,000.Benson Corporation will report a(n):

When rates of return are high in a country with a stable economy,international investors buy stocks and bonds of that country.This activity increases the country's exchange rate.

When a U.S.company owns a foreign subsidiary,a foreign-currency translation adjustment is calculated using the subsidiary's balance sheet.