Exam 14: Investments and International Operations

Kramer Corporation had the following long-term investment transactions. Jan. 2 Purchased 5,000 shares of Optic, Inc. for \ 42 per share plus \ 7,000 in fees and commission. These shares represent a 35\% ownership of Optic. Oct. 15 Received Optic, Inc. cash dividend of \ 2 per share. Dec. 31 Optic reported a net loss of \ 66,000 for the year. Prepare the journal entries Kramer Corporation should record for these transactions and events.

Long-term investments in debt securities not classified as held-to-maturity securities are classified as available-for-sale securities.

A U.S.company's credit sale to an international customer to be paid in a foreign currency is recorded using the exchange rate on the date of sale.

A company had net income of $2,785,000,net sales of $250,000,000,average total assets of $6,000,000 and equity investments of $40,000.Its return on total assets equals:

A company had net income of $450,000 in 2009 and $620,000 in 2010.The company had average total assets of $2,500,000 in 2009 and $3,000,000 in 2010.Calculate the return on total assets for 2009 and 2010.Comment on the results.

An increase in the price of the U.S.dollar against other currencies puts U.S.companies in a stronger competitive position internationally.

A company holds $40,000 of 7% bonds as a held-to-maturity security.The bondholder's journal entry to record receipt of the semiannual interest payment includes a debit to Cash for $2,800 and a credit to Interest Revenue for $2,800.

Short-term investments in held-to-maturity debt securities are accounted for using the ___________________________.

A company paid $47,500 plus a broker's fee of $400 to acquire 8% bonds with a $60,000 maturity value.The company intends to hold the bonds to maturity.The cash proceeds the company will receive upon maturity of the bonds is:

Clark Corporation purchased 40% of IT corporation for $125,000 on January 1.On May 20 of the same year,IT Corporation declared total cash dividends of $30,000.At year-end,IT Corporation reported net income of $150,000.The balance in Clark Corporation's Long-Term Investment in IT Corporation account as of December 31 should be:

On January 1,2008,Posten Company purchased 10,000 shares of Toma Company for $78,000 plus a broker's fee of $2,000.Toma Company has a total of 40,000 shares of common stock outstanding and it is presumed the Posten Company will have a significant influence over Toma.Toma declared and paid cash dividends of $0.93 per share in 2008 and 2009.Toma's net income was $190,000 and $270,000 for 2008 and 2009 respectively.The January 1,2010 entry on the books of Posten Company to record the sale of 4,500 shares of Toma Company stock for $85,000 cash should be:

Long-term investments in held-to-maturity debt securities are accounted for using the ___________________________.

Accounting for long-term investments in equity securities with controlling influence uses the:

A company had net income of $2,660,000,net sales of $25,000,000 and average total assets of $8,000,000.Its return on total assets is equal to:

Investments in equity securities where the investor has a controlling influence are accounted for using the ________________________________.

The equity method with consolidation is used in accounting for long-term investments in equity securities with controlling influence.

Long-term investments in held-to-maturity debt securities are accounted for using the:

Columbia Corp.held 1,500 of Vianco common stock with a cost of $74,387.These shares were classified as a long-term available-for-sale investment.It sold the shares on December 13 for $55,275.Prepare the journal entry to record this sale.

An investing company that owns more than ________ of another (investee)company's voting stock is presumed to have controlling influence over the investee.

When a credit sale is denominated in a foreign currency,the foreign exchange rate used to record the sale is the current exchange rate: