Question 1

Define debt securities and equity securities. Include their similarities and differences in your discussion.

Accepted Answer

Debt securities are notes and bonds that

Question 2

Ruben Company purchased $100,000 of Evans Company bonds at 100. Ruben later sold the bonds at $104,500 plus $500 in accrued interest. The journal entry to record the sale of the bonds would be

Accepted Answer

A)  debit Cash, $105,000; credit Investment-Evans Company Bonds, $104,500, and Interest Revenue, $500 
B)  debit Cash, $105,000; credit Investment-Evans Company Bonds, $100,000, and Gain on Sale of Investments, $5,000 
C)  debit Cash, $104,500, and Interest Receivable, $500; credit Investment-Evans Company Bonds, $100,000, Gain on Sale of Investments, $4,500, and Interest Revenue, $500 
D)  debit Cash, $105,000; credit Investment-Evans Company Bonds, $100,000, Gain on Sale of Investments, $4,500, and Interest Revenue, $500 
A)  debit Cash, $105,000; credit Investment-Evans Company Bonds, $104,500, and Interest Revenue, $500 
B)  debit Cash, $105,000; credit Investment-Evans Company Bonds, $100,000, and Gain on Sale of Investments, $5,000 
C)  debit Cash, $104,500, and Interest Receivable, $500; credit Investment-Evans Company Bonds, $100,000, Gain on Sale of Investments, $4,500, and Interest Revenue, $500 
D)  debit Cash, $105,000; credit Investment-Evans Company Bonds, $100,000, Gain on Sale of Investments, $4,500, and Interest Revenue, $500

Question 3

Prepare the journal entries for the following transactions for Batson Co. (a) Batson Co. purchased 1,200 shares of the total of 100,000 outstanding shares of Michael Corp. stock for $ \$ 20.75 $ per share plus a $ \$ 70 $ commission.
(b) Michael's total earnings for the period are $ \$ 84,000 $.
(c) Michael's paid a total of $ \$ 40,000 $ in cash dividends to sharehol ders of record.

Accepted Answer

(a) @#IMG-DLM&_TB228

Question 4

It is not possible for one company to influence the operating policies of another company unless it owns more than 50% interest in that company.

Accepted Answer

A) True 
 B)False

Question 5

Changes in the value of available-for-sale securities

Accepted Answer

A)  are reported as part of stockholders' equity 
B)  are recognized on the income statement 
C)  are not recognized 
D)  are recognized on the income statement and as part of stockholders' equity 
A)  are reported as part of stockholders' equity 
B)  are recognized on the income statement 
C)  are not recognized 
D)  are recognized on the income statement and as part of stockholders' equity

Question 6

The investor carrying an investment by the equity method records cash dividends received as an increase in the carrying amount of the investment.

Accepted Answer

A) True 
 B)False

Question 7

Held-to-maturity securities

Accepted Answer

A)  are reported at fair value 
B)  include stocks as well as bonds 
C)  may be reported as current or noncurrent assets 
D)  all of these 
A)  are reported at fair value 
B)  include stocks as well as bonds 
C)  may be reported as current or noncurrent assets 
D)  all of these

Question 8

An equity investment in less than 20% of another company's stock is accounted for using the fair value method.

Accepted Answer

A) True 
 B)False

Question 9

Ruben Company purchased $100,000 of Evans Company bonds at 100 plus $1,500 in accrued interest. The bond interest rate is 8% and interest is paid semiannually. The journal entry to record the purchase would be

Accepted Answer

A)  debit Investment-Evans Company Bonds, $101,500; credit Cash, $101,500 
B)  debit Investment-Evans Company Bonds, $100,000; credit Interest Revenue, $1,500, and Cash, $98,500 
C)  debit Investment-Evans Company Bonds, $100,000, and Interest Receivable $1,500; credit Cash $101,500 
D)  debit Investment-Evans Company Bonds, $100,000; credit Cash $100,000 
A)  debit Investment-Evans Company Bonds, $101,500; credit Cash, $101,500 
B)  debit Investment-Evans Company Bonds, $100,000; credit Interest Revenue, $1,500, and Cash, $98,500 
C)  debit Investment-Evans Company Bonds, $100,000, and Interest Receivable $1,500; credit Cash $101,500 
D)  debit Investment-Evans Company Bonds, $100,000; credit Cash $100,000

Question 10

GAAP requires trading and available-for-sale investments to be reported

Accepted Answer

A)  at their fair value 
B)  at their historical cost 
C)  at their market value 
D)  at their net realizable value 
A)  at their fair value 
B)  at their historical cost 
C)  at their market value 
D)  at their net realizable value

Question 11

On January 2, Todd Company acquired 40% of the outstanding stock of McGuire Company for $205,000. For the year ending December 31. McGuire earned income of $48,000 and paid dividends of $14,000.
​
Prepare the entries for Todd Company for the purchase of the stock, share of McGuire income, and dividends received from McGuire.

Accepted Answer

The answer of On January 2, Todd Company acquired 40%...

Question 12

Trading securities are

Accepted Answer

A)  reported at fair value on the balance sheet and as unrealized gains or losses on the income statement 
B)  not reported on the balance sheet 
C)  reported as unrealized gains or losses on the income statement 
D)  reported at fair value on the balance sheet 
A)  reported at fair value on the balance sheet and as unrealized gains or losses on the income statement 
B)  not reported on the balance sheet 
C)  reported as unrealized gains or losses on the income statement 
D)  reported at fair value on the balance sheet

Question 13

The corporation owning all or a majority of the voting stock of another corporation is known as the parent company.

Accepted Answer

A) True 
 B)False

Question 14

Held-to-maturity securities are reported on the balance sheet at fair value.

Accepted Answer

A) True 
 B)False

Question 15

On January 1, the Valuation Allowance for Trading Investments account has a zero balance. On December 31, the cost of trading securities portfolio was $64,200, and the fair value was $67,000.
​
Prepare the December 31 adjusting journal entry to record the unrealized gain or loss on trading investments.

Accepted Answer

The answer of On January 1, the Valuation Allowance for...

Question 16

On March 1, Year 1, Chase Inc. purchases 35% of the outstanding shares of Glory Corporation stock for $325,000. On December 31, Year 1, Glory reports net income of $162,000. On January 15, Year 2, Glory pays total dividends to stockholders of $33,000.
Journalize the three transactions.

Accepted Answer

The answer of On March 1, Year 1, Chase Inc....

Question 17

During the first year of operations, Makala Company purchased two trading investments as follows:
​ $\begin{array}{|l|c|r|}
\hline \text { Security } & \text { Shares Purchased } &{\text { Cost }} \
\hline \text { Oceanna Company } & 700 & \$ 29,000 \
\hline \text { Rockledge, Inc. } & 1,900 & 41,000 \
\hline
\end{array}$ ​
Assume that as of December 31, the Oceanna Company stock had a market value of $49 per share and Rockledge, Inc. stock had a market value of $20 per share. Makala had 10,000 shares of no-par stock outstanding that was issued for $150,000. For the year ending December 31, Makala had net income of $105,000. No dividends were paid.
​ (a) Frepare the current assets section of the balance sheet presentation for the trading securities as of December 31.
(b) Explain how the gain or loss would be reported on the income statement. ​

Accepted Answer

(a) @#IMG-DLM&_TB2281_00 (b) T

Question 18

When a bond is purchased for an investment, the purchase price, minus the brokerage commission, plus any accrued interest is recorded.

Accepted Answer

A) True 
 B)False

Question 19

As with other assets, the cost of a bond investment includes all costs related to the purchase.

Accepted Answer

A) True 
 B)False

Question 20

Journalize the entries to record the following selected equity investment transactions completed by Perry Company during the current year. Perry accounts for this investment using the fair value method.
​

Accepted Answer

The answer of Journalize the entries to record the following...

Define debt securities and equity securities. Include their similarities and differences in your discussion.

Ruben Company purchased $100,000 of Evans Company bonds at 100. Ruben later sold the bonds at $104,500 plus $500 in accrued interest. The journal entry to record the sale of the bonds would be

It is not possible for one company to influence the operating policies of another company unless it owns more than 50% interest in that company.

Changes in the value of available-for-sale securities

The investor carrying an investment by the equity method records cash dividends received as an increase in the carrying amount of the investment.

Held-to-maturity securities

An equity investment in less than 20% of another company's stock is accounted for using the fair value method.

Ruben Company purchased $100,000 of Evans Company bonds at 100 plus $1,500 in accrued interest. The bond interest rate is 8% and interest is paid semiannually. The journal entry to record the purchase would be

GAAP requires trading and available-for-sale investments to be reported

Trading securities are

The corporation owning all or a majority of the voting stock of another corporation is known as the parent company.

Held-to-maturity securities are reported on the balance sheet at fair value.

On March 1, Year 1, Chase Inc. purchases 35% of the outstanding shares of Glory Corporation stock for $325,000. On December 31, Year 1, Glory reports net income of $162,000. On January 15, Year 2, Glory pays total dividends to stockholders of $33,000. Journalize the three transactions.

When a bond is purchased for an investment, the purchase price, minus the brokerage commission, plus any accrued interest is recorded.

As with other assets, the cost of a bond investment includes all costs related to the purchase.

Journalize the entries to record the following selected equity investment transactions completed by Perry Company during the current year. Perry accounts for this investment using the fair value method.

Accounting and Business

Double-Entry Accounting

Adjustments: Accruals and Deferrals

The Accounting Cycle

Accounting for Retail Businesses

Inventories

Internal Control and Cash

Receivables

Long-Term Assets: Fixed and Intangible

Liabilities: Current, Installment Notes, and Contingencies

Liabilities: Bonds Payable

Corporations: Organization, Stock Transactions, and Dividends

Statement of Cash Flows

Financial Statement Analysis

Filters

Exam 15:Investments

Define debt securities and equity securities. Include their similarities and differences in your discussion.

Ruben Company purchased $100,000 of Evans Company bonds at 100. Ruben later sold the bonds at $104,500 plus $500 in accrued interest. The journal entry to record the sale of the bonds would be

It is not possible for one company to influence the operating policies of another company unless it owns more than 50% interest in that company.

Changes in the value of available-for-sale securities

The investor carrying an investment by the equity method records cash dividends received as an increase in the carrying amount of the investment.

Held-to-maturity securities

An equity investment in less than 20% of another company's stock is accounted for using the fair value method.

Ruben Company purchased $100,000 of Evans Company bonds at 100 plus $1,500 in accrued interest. The bond interest rate is 8% and interest is paid semiannually. The journal entry to record the purchase would be

GAAP requires trading and available-for-sale investments to be reported

Trading securities are

The corporation owning all or a majority of the voting stock of another corporation is known as the parent company.

Held-to-maturity securities are reported on the balance sheet at fair value.

On March 1, Year 1, Chase Inc. purchases 35% of the outstanding shares of Glory Corporation stock for $325,000. On December 31, Year 1, Glory reports net income of $162,000. On January 15, Year 2, Glory pays total dividends to stockholders of $33,000. Journalize the three transactions.

When a bond is purchased for an investment, the purchase price, minus the brokerage commission, plus any accrued interest is recorded.

As with other assets, the cost of a bond investment includes all costs related to the purchase.

Journalize the entries to record the following selected equity investment transactions completed by Perry Company during the current year. Perry accounts for this investment using the fair value method. ​

Accounting and Business

Double-Entry Accounting

Adjustments: Accruals and Deferrals

The Accounting Cycle

Accounting for Retail Businesses

Inventories

Internal Control and Cash

Receivables

Long-Term Assets: Fixed and Intangible

Liabilities: Current, Installment Notes, and Contingencies

Liabilities: Bonds Payable

Corporations: Organization, Stock Transactions, and Dividends

Statement of Cash Flows

Financial Statement Analysis

Filters

Journalize the entries to record the following selected equity investment transactions completed by Perry Company during the current year. Perry accounts for this investment using the fair value method.