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

Assets are listed on the balance sheet from the smallest dollar amount to the largest dollar amount.

An investment in common stock acquired during the year at a cost of $50,000 has a market value at year end of $50,290. The adjusting entry requires a credit to Allowance to Adjust Investment to Market for $290.

Under the equity method, if the Investment is sold at a gain, the gain is:

Receiving a stock dividend from an available-for-sale investment requires the following journal entry:

If one company owns more than 50% of the common stock of another company:

A noncontrolling (minority) interest arises when:

Present value is the value now of a given amount to be paid or received in the future, assuming compound interest.

Bonds of publicly traded companies are traded similarly to stocks.

Long-term investments are listed on the balance sheet after current assets and property, plant, and equipment.

The future value of a single amount is the value at a future date of a given amount invested now.

The purchases of available-for-sale investments would appear on a statement of cash flows in:

On the balance sheet, Available-for-sale investments in stock are reported at:

Under the equity method of accounting for long-term investments in common stock, when a cash dividend is received from the investee company:

The principal is the amount borrowed or invested.

The available-for-sale method (market value method) of accounting for long-term investments in stock should be used when the:

On January 1, 2012, Berger Corporation paid $800,000 to purchase 40% of the outstanding stock of Oakley Company. Oakley Company reported net income of $200,000 for the year ending December 31, 2012 and paid cash dividends of $60,000 during 2012. On January 1, 2013, Berger Corporation sells its entire investment in Oakley Company for $1,100,000. Berger Corporation will report a(n):

The sale of common stock is shown on the statement of cash flows as:

If the equity method is used to account for stock investments, the investor company decreases the investment account when it receives a cash dividend from the investee company.

If bonds are issued at a premium, the carrying amount of the bonds will be greater than the face value of the bonds until it reaches the maturity date.

An increase in foreign currency value relative to the U.S. dollar between the date of purchase and date of payment will create an exchange gain.