Exam 14: Investments and International Operations

Parris Corporation purchased 40% of Samitz Corporation for $100,000 on January 1.On November 17 of the same year,Samitz Corporation declared total cash dividends of $12,000.At year-end,Samitz Corporation reported net income of $60,000.The balance in the Parris Corporation's Long-Term Investment in Samitz Corporation at December 31 should be:

Identify the three types of classifications for non-influential investments in securities.

A company paid $500,000 for 12% bonds with a par value of $500,000.The bonds pay 6% interest semiannually on September 1 and March 1.The company intends to hold the bonds until they mature.Prepare the journal entries for the following dates and transactions related to this bond acquisition. (1)Bonds purchased on September 1,2009. (2)Year-end adjusting entry,December 31,2009. (3)Receipt of semiannual interest March 1,2010. (4)Redemption of the bonds at maturity on August 31,2016.

A company has net income of $130,500.Its net sales were $1,740,000 and its total assets were $2,750,000.Its total asset turnover is equal to 4.7%.

Explain how investors report investments in equity securities when the investor has a controlling influence over an investee.

On November 12,Kendra,Inc.,a U.S.Company,sold merchandise on credit to Nakakura Company of Japan at a price of 1,500,000 yen.The exchange rate was $0.00837 per yen on the date of sale.On December 31,when Kendra prepared its financial statements,the exchange rate was $0.00843.Nakakura Company paid in full on January 12,when the exchange rate was $0.00861.On December 31,Kendra should prepare the following journal entry for this transaction:

The currency in which a company presents its financial statements is known as the:

Savan Co.purchased 14,000 shares of Briton Corporation's 40,000 shares of common stock on December 31,2009.This represented 35% of Briton's outstanding shares and gave Savan Co.significant influence over Briton's management and operations.On October 11,2010,Briton declared and paid cash dividends of $30,000.On December 31,2010,Briton reported net income of $125,000 for the year.Prepare the journal entries Savan Co.should record to account for its investment in Briton Corporation during 2010.

A company had net income of $82,000,net sales of $781,000 and average total assets of $300,000.Its profit margin and total asset turnover were respectively:

When an investor company owns more than 25% of the voting stock of an investee company,it has a controlling influence.

In accounting for non-influential securities:

On October 31,Mayfair Co.received cash dividends of $0.15 per share from its investment in Carter Corp.'s common stock.Mayfair owned 1,200 shares of Carter Corp.'s stock on October 31.The investment is considered available for sale.Prepare the investor's journal entry to record the receipt of the cash dividends.

Brown Company sold supplies in the amount of 15,000 euros to a French company when the exchange rate was $1.15 per euro.At the time of payment,the exchange rate decreased to $1.12.Brown must record a loss of $450.

A company owns $100,000 of 9% bonds that pay interest on October 1 and April 1.The amount of interest accrued on December 31 (the company's year-end)would be:

Explain how to record the sale of trading securities.

Long-term investments can include funds set aside for special purposes such as bond sinking funds.

Multinational corporations can be U.S.companies with operations in other countries.

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 2011?

Doherty Corporation had net income of $30,000,net sales of $1,000,000 and average total assets of $500,000.Its return on total assets is equal to:

Chrono Co.held bonds of Ayrford Co.with a cost of $125,000 and a year-end market value of $123,700.Chrono also held 1,500 shares of Avian common stock with a cost of $25,000 and a year-end market value of $26,100.These are classified as long-term available-for-sale securities.Prepare the journal entry to record the market value of the investments as of its December 31 year-end.