Exam 28: Accounting for Investments

The following transactions and information pertain to Graczyk Corporation for 2014.Prepare journal entries to record these transactions (omit explanations):

Stock categorized as trading securities is purchased for $72,000.At year end,when the market value of the stock is $63,000,the adjusting entry that would be recorded is:

Insider trading is considered unethical,but it is not illegal in the United States.

Dividends received on investments are accounted for in the same way under the cost-adjusted-to-market and the equity methods.

Which of the following categories of investments can be debt but not equity securities?

Camp Corporation purchased 8,500 shares of Tent Corporation common stock for $80 per share on January 1,2014.Tent reported net income of $220,000 for 2014 and paid dividends of $90,000 during 2014.As of December 31,2014,the market value of Tent Corporation common stock was $80 per share.Assuming the shares owned by Camp represent 30 percent of the total outstanding stock of Tent,Camp Corporation should report the long-term investment on December 31,2014,at a carrying value of

When the market value of available-for-sale securities exceeds cost,an unrealized loss appears in stockholders' equity as an addition.

A controlling investment is defined as owning what percent of the stock of another company?

Detailed information about a company's investments is never disclosed in the notes to the financial statements.

The purchase and sale of debt and equity securities would appear in which section of the statement of cash flows?

Which of the following is not a category of investments?

When a company receives a dividend from its investee,what will be the effect on the financial statements of the investing company if it uses the equity method?

A noninfluential and noncontrolling investment is defined as ownership of less than 25 percent of the stock of another company.

With few exceptions,all subsidiaries in which the parent company owns a controlling interest (more than 50 percent)must be consolidated with the parent company for financial reporting purposes.

Singletary Corporation owns a 40 percent interest in the stock of Fleming Corporation.During 2014,Fleming pays $50,000 in dividends to Singletary and reports $214,000 in net income.Singletary Corporation's investment in Fleming will increase Singletary's income before income taxes by

Winters Corporation purchased 15,000 shares of Poores Corporation common stock for $60 per share on January 2,2014.Poores Corporation reported net income of $1,500,000 for 2014 and paid dividends of $300,000 during 2014.Poores has a total of 50,000 shares of common stock outstanding. -The entry that would be recorded to recognize the income is:

Held-to-maturity securities are always debt securities,and never equity securities.

Frankel Company often invests in the stock of other companies for long-term purposes.None of the stocks currently held by Frankel qualify for use of the equity method.The following amounts relate to Frankel's long-term portfolio of marketable equity securities. Based on the above information,the adjusting entry on December 31,2014 is:

Long-term bond investments that are classified as available-for-sale must be valued on the balance sheet at fair value.

Camp Corporation purchased 8,000 shares of Tent Corporation common stock for $80 per share on January 1,2014.Tent reported net income of $220,000 for 2014 and paid dividends of $90,000 during 2014.As of December 31,2014,the market value of Tent Corporation common stock was $80 per share.Assuming the shares owned by Camp represent 30 percent of the total outstanding stock of Tent,the entry to record the recognition of income by Camp Corporation is: