Exam 28: Accounting for Investments

Stock categorized as trading securities is purchased for $52,000.At year end,when the market value of the stock is $61,000,the adjusting entry that would be recorded is:

Available-for-sale debt securities are valued on the balance sheet at

For available-for-sale securities,an unrealized loss on long-term investments appears as part of other comprehensive income (loss)in the company's financial statements.

When the cost-adjusted-to-market method is used to account for a long-term investment in the stock of another company,the carrying value of the investment is directly affected by

The cost-adjusted-to-market method of accounting for investments is used when the investment is

Unless there is evidence to the contrary,an investor owning 35 percent of the stock of an investee is assumed to have significant influence.

Most long-term bond investments are classified as held-to-maturity securities.

Discuss the financial statement presentation of the account Allowance to Adjust Short-Term Investments to Market,distinguishing between the effect of a debit balance and the effect of a credit balance in the account.

When the equity method is used to account for an investment in stock,the investor will report its share of the investee's annual earnings as income in proportion to how much the investee distributes in the form of dividends.

Use this information to answer the following question.These facts concern the long-term stock investments of DeBord Corporation: -The entry to record the receipt of the cash dividend from Shust Corporation is:

Short-term available-for-sale securities are valued on the balance sheet at

Kent Corporation holds 1,900 shares of Russell Corporation common stock as its sole long-term investment.Kent does not have significant influence or control over Russell.The stock was purchased during 2013 at a price of $120 per share.On December 31,2013,the market price of Russell's stock was $108 per share.On December 31,2014,the market price of Russell's stock was $136 per share.What should be reported as the carrying value of the investment on Kent's December 31,2013,and December 31,2014,balance sheets,respectively?

U.S.Treasury bills are considered equity securities.

How is the purchase of long-term investments in bonds accounted for when purchased between interest payment dates?

Stock categorized as trading securities is purchased for $52,000.At year end,when the market value of the stock is $61,000,the balance of the Short-Term Investments account appearing on the balance sheet will be

A short-term investment in a U.S.Treasury bill costs $24,400 and will mature six months later at $25,000.Management intends to hold the investment until it matures.The entry to record the adjusting entry on December 31,assuming three months have passed is:

Investments are valued on the balance sheet at the original purchase price,even if the price has changed since the date of purchase.

When bonds are purchased between interest dates,the buyer must pay (in addition to the bonds' cost)the amount of interest that has accrued since the last interest payment date.

Merckle Corporation owns 40 percent of the voting stock of Grant Corporation and accounts for the investment using the equity method;Grant Corporation reports a net loss of $30,000.Merckle Corporation's entry to record the share of loss is:

All of the following are conditions that could affect the valuation of investments on the balance sheet except