Exam 14: Investments and International Operations

If a long-term investment in an equity security gives the investor significant influence over the investee,the investment is classified as available-for-sale.

Trading securities are securities that are purchased by trading other securities rather than by paying cash.

The following information is available from the financial statements of Cosmotropolis 2009 2010 2011 Total assets, December 31 \ 341,585 \ 395,412 \ 922,357 Net income 35,550 49,512 68,149 What is Cosmotropolis' return on total assets for 2010?

At acquisition,debt securities are:

A U.S.Company's credit sale to an international customer to be paid in a foreign currency requires using the same exchange rate for the date of sale and the cash payment date.

Any cash dividends received from equity securities are recorded as Dividend Expense.

Long-term investments include investments in land or other assets not used in a company's operations.

Foreign exchange rates fluctuate due to many factors including changing political and economic conditions.

On May 1,Franke Co.purchases 2,000 shares of Computech stock for $25,000.This investment is considered to be an available-for-sale investment.On July 31 (Franke's year-end),the stock had a market value of $28,000.Franke should record a credit to Unrealized Gain-Equity for $3,000.

Haladam Company had the following transactions relating to investments in trading securities during the year.Prepare the required general journal entries for these transactions. May 4 Haladam purchased 600 shares of Cob Company stock at $\$ 120$ per share plus a $\$ 750$ brokerage fee. July 1 Haladam received a \$2.50 per share cash dividend on the Cob Company stock. Sept. 15 Sold 300 shares of the Cob Company stock for $\$ 125$ per share, less a $\$ 450$ brokerage fee. Dec. 31 The market value of the Cob Company stock (the only investment that Haladam owns) is \$124 per share. The balance of the Market Adjustment - Trading a zero balance prior to adjustment.

Bond sinking funds are examples of short-term investments.

Long-term investments:

On January 4,2008,Larsen Company purchased 5,000 shares of Warner Company for $59,500 plus a broker's fee of $1,000.Warner Company has a total of 25,000 shares of common stock outstanding and it is presumed the Larsen Company will have a significant influence over Warner.During each of the next two years,Warner declared and paid cash dividends of $0.85 per share.Its net income was $72,000 and $67,000 for 2008 and 2009,respectively.The January 12,2010 entry to record the sale of 3,000 shares of Warner Company stock for $39,000 cash should be:

The price of one currency stated in terms of another currency is referred to as the:

If a company owns more than 20% of the stock of another company and the stock is being held as a long-term investment,which method would the investor normally use to account for this investment?

On January 2,Froxel Company purchased 10,000 shares of Sandia Corp.Common Stock at $19 per share plus a $3,000 commission.This represents 30% of Sandia Corp.'s outstanding stock.On August 6,Sandia Corp.declared and paid cash dividends of $1.75 per share and on December 31 it reported net income of $150,000.Prepare the necessary entries Froxel Company must make to account for these transactions and events.

A controlling influence over the investee is based on the investor owning voting stock exceeding:

If the exchange rate for Canadian and U.S.dollars is 0.7382 to 1,this implies that 2 Canadian dollars will buy 1.48 worth of U.S.dollars.

Consolidated financial statements:

A company had investments in long-term available-for-sale securities.At the end of the current year the company's portfolio had a $731,000 cost and $730,000 market value. What is the current year's adjustment to market value given the following account balances at the end of the prior year?