Exam 8: Long-Term Investments and the Time Value of Money

JetNew Corporation sold merchandise on June 25, 2014 to a US company for 560,000 US dollars. JetNew received payment from the US company on July 5, 2014. The US was worth $1.04 on June 25, 2014, and $1.05 on July 5, 2014. Prepare the appropriate sales and cash receipts entries for JetNew Corporation on May 25, 2014, and July 5, 2014.

On January 1, 2014, Red Deer Corporation paid $360,000 to purchase 32% of the outstanding voting stock of English Court Corporation. The equity method is used to account for the investment. The following data relate to this investment. 2014 Prepare all journal entries for 2014 and 2015 relating to Red Deer Corporation's investment in English Court Corporation.

Yukon Electrical Company owns all of the stock of Simmons Corporation and 80% of the stock of I-Tek Corporation. In 2015, Yukon earned net income of $450,000, Simmons earned $120,000, and I-Tek earned $180,000. Yukon's consolidated income statement would report consolidated net income of:

On May 1, 2014, Gigajoule Company paid $180,000 to purchase $200,000 of bonds that carry a 5% contract rate of interest and will mature in 5 years from the date of purchase. Interest on the bonds is paid May 1 and November 1 of each year. Gigajoule Company is a private company that prepares its financial statements in accordance with ASPE. It plans to hold the bonds until maturity and amortizes the premium or discount on bonds using the straight-line method each interest payment date. As of December 31, 2014, the bonds had a market value of $185,000. a. Prepare all necessary journal entries for 2014 dealing with the investment in bonds. b. Show how the bonds would be presented on the balance sheet dated December 31, 2014.

On January 1, 2014, TXU Europe Corporation purchased 40% of the outstanding stock of Alberta Power Pool Corporation for $800,000. Net income reported by Alberta Power Pool Corporation for 2014 and 2015 was, respectively, $100,000 and $125,000. Dividends paid by Alberta Power Pool Corporation during 2014 and 2015 were, respectively, $60,000 and $75,000. The long-term investment will appear on TXU Europe Corporation's December 31, 2015, balance sheet at:

Hot Corporation sold merchandise on March 5, 2015, to a Swiss company for 320,000 Swiss francs. Hot Corp. received payment from the Swiss company on April 3, 2015. The Swiss franc was worth $0.26 on March 5, 2015, and $0.32 on April 3, 2015. Prepare the appropriate sales and cash receipts entries for Hot Corporation on March 5, 2015, and April 3, 2015.

If an investor company owns between 20% and 50% of the common shares of another business, cash dividends received from the investee company are generally recorded by the investor company by:

Investment in subsidiaries involves purchasing 25% of the organization's shares.

The purchase of long-term investments would appear on a cash flow statement in the:

If JetNew, a Canadian company, operates a subsidiary in India, the financial statements of that subsidiary must be translated into Canadian dollars prior to consolidation.

A controlling interest is normally one where the investor:

A short-term investment is not:

From the buyer's perspective, a discount on a long-term investment in bonds means additional interest revenue while a premium means less interest revenue.

Small Track Corporation purchased on account a new grooming machine on September 13, 2015, from a Welsh company for 250,000 British pounds. Small Track paid the Welsh company on September 26, 2015. The British pound was worth $1.75 on September 13, 2015, and $1.77 on September 26, 2015. Prepare entries for Small Track Corporation needed on September 13 and September 26, 2015.

The sale of a long-term investment would appear on a cash flow statement as a:

Goodwill is a(n) ________ on the ________.

Prepare journal entries to record the following transactions associated with at fair value through other comprehensive income investments purchased by Spark Spread Corporation during 2015 Spark Spread Corporation had no investments prior to 2015. a. Purchased 1,500 shares of Mercury Coal Corporation common shares for $27.50 per share. b. Mercury Coal Corporation pays a $1.25 per share dividend to all common shareholders. c. On December 31, 2015, the market price of Mercury Coal Corporation stock is $28.00 per share.