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

On January 1, 2012, Winston Company purchased 6% bonds for $50,000 cash. Interest is payable semiannually on July 1 and January 1. The entry to record the July 1 semiannual interest payment would include a:

Goodwill arises when a parent company must pay more to acquire a subsidiary company than the cost of the subsidiary's net assets.

For accounting purposes, receipt of a stock dividend is handled the same as a receipt of a cash dividend.

If the single amount of $5,000 is to be received in 3 years and discounted at 6%, its present value is:

Berger Corporation paid $800,000 for 100,000 shares of Oakley Company's common stock, which represents 40% of Oakley's outstanding common stock. Oakley reported net income of $200,000 and paid cash dividends of $60,000. Berger should report the investment in Oakley Company on its balance sheet at:

Wolverine Corporation owns 29% of Buckeye Corporation. Net income for Buckeye for the year is $250,000. The journal entry prepared by Wolverine Corporation includes a:

Able Company receives a stock dividend of 50 shares from Cole Company. Able previously owned 750 shares of Cole stock that had a cost basis of $4,800. The cost basis per share of Cole stock is:

Other comprehensive income:

In accounting for investments, entries are made for each of the following except the:

A company that owns 40% of the common stock of another business recognizes revenue from the investment when:

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

On the maturity date of the bond, the bondholder will receive the bond's present value.

Big League Corporation owns 500 shares of Small Time Company's common stock. Small Time has 100,000 shares of common stock outstanding. Big League Corporation will show the investment on their books as:

On the statement of cash flows, the cash paid to purchase available-for-sale investments is shown as a(n):

On January 1, 2012, Rex Corporation purchased 35% of the outstanding stock of Alamo Corporation for $500,000. Net income reported by Alamo for 2012 was $150,000. Dividends paid by Alamo during 2012 were $40,000. The amount of investment revenue that Rex should recognize for 2012 is:

Under the equity method, a company should report an unrealized gain on a long-term investment:

Under the equity method, when the equity of the investee increases, the investment account on the books increases.

The Allowance to Adjust Investments account is a Long-Term Asset account.

When an investor owns between 20% and 50% of the outstanding stock of another company, the ________ method is used to account for stock investments.

Anderson Company has purchased equipment that requires annual payments of $20,000 to be paid at the end of each of the next 6 years. The discount rate is 12%. What amount will be used to record the equipment?