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

A consolidated balance sheet shows:

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's investment in Darcy will increase Milton's net income by:

On January 1, 2012, Plymouth Company purchases $100,000, 6% bonds at a price of 90.4 and a maturity date of January 1, 2016. Interest is paid semiannually, on January 1 and July 1. Plymouth Company has a calendar year end. The entry to record the purchase of the bond investment on January 1, 2012, would include a:

On January 1, 2012, Plymouth Company purchases $100,000, 6% bonds at a price of 90.4 and a maturity date of January 1, 2016. Interest is paid semiannually, on January 1 and July 1. Plymouth Company has a calendar year end. The adjusting entry to amortize the bond investment on December 31, 2012 would include a:

On January 1, 2012, Cashew Corporation purchased 70,000 of the 210,000 shares of outstanding stock of Peanut Company for $550,000. Net income reported by Peanut Company for 2012 was $450,000. Dividends paid by Peanut Company during 2012 were $150,000. The long-term investment will appear on Cashew Corporation's December 31, 2012 balance sheet in the amount of:

A company that owns more than 50% of the common stock of another company is known as the:

If 15% of the common stock of an investee company is purchased as a long-term investment, the appropriate method of accounting for the investment is:

A noncontrolling (minority) interest arises when a parent company must pay more to acquire a subsidiary company than the market value of the subsidiary's net assets.

On January 1, 2012, Plymouth Company purchases $100,000, 6% bonds at a price of 90.4 and a maturity date of January 1, 2016. Interest is paid semiannually, on January 1 and July 1. Plymouth Company has a calendar year end. The entry for the receipt of interest on January 1, 2012 would include a:

Dividends received on stock investments of less than 20% should be credited to the Investment account.

On January 1, Bucket Company purchased as an investment a $1,000, 7% bond for $980. Bucket plans to hold the bond for two years. The bond pays interest on January 1 and July 1. The entry to record the interest accrual on December 31 would include a:

Consolidated financial statements are prepared in place of the financial statements for the parent and subsidiary companies.

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

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

Dessert Corporation acquired 100% of the common stock of Tart Company for $270,000. On the date of acquisition, Tart Company's stockholders' equity consisted of: Common Stock, $100,000; Retained Earnings, $170,000. The elimination entries to be made on a worksheet to prepare a consolidated balance sheet would include a:

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

Under the equity method, the investor applies its percentage of ownership in recording its share of the investee's net income, but not dividends.

The carrying amount of bonds at maturity should be equal to the face value of the bonds.

For accounting purposes, the method used to account for long-term investments in common stock is determined by:

On the balance sheet, Interest Receivable is reported as a fixed asset.