Question 1

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

Accepted Answer

A) True 
 B)False  True

Question 2

Debt securities are recorded at cost when purchased, and interest revenue for investments in debt securities is recorded when earned.

Accepted Answer

A) True 
 B)False  True

Question 3

Explain how transactions (both sales and purchases) in a foreign currency are recorded and reported.

Accepted Answer

When a selling company makes a credit sale to a foreign customer and the sales terms call for payment in a foreign currency, the selling company must translate the foreign currency into dollars to record the receivable. If the exchange rate changes before payment is received, foreign exchange gains or losses are recognized in the year they occur. The same method is required when a buying company makes a credit purchase from a foreign supplier and is required to make payment in a foreign currency. Finally, a company with a foreign subsidiary that maintains its accounts in a foreign currency must translate these account balances into dollars before they are reported in consolidated statements.

Question 4

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

Accepted Answer

If an investing company owns more than 5

Question 5

Management's intent determines whether an available-for-sale security is classified as long-term or short-term.

Accepted Answer

A) True 
 B)False

Question 6

What are the accounting basics for debt securities, including recording their acquisition, interest earned, and their disposal?

Accepted Answer

At acquisition, debt securities are reco

Question 7

A company has net income of $130,500. Its net sales are $1,740,000 and its average total assets are $2,750,000. Its profit margin equals 7.5%.
Profit margin = $130,500/$1,740,000 = 7.5%

Accepted Answer

A) True 
 B)False

Question 8

Profit margin reflects the percent of net income in each dollar of net sales.

Accepted Answer

A) True 
 B)False

Question 9

Investments in debt and equity securities that the company actively manages and trades for profit are referred to as short-term investments in:

Accepted Answer

A) Available-for-sale securities. 
B) Held-to-maturity securities. 
C) Trading securities. 
D) Realizable securities. 
E) Liquid securities. 
A) Available-for-sale securities. 
B) Held-to-maturity securities. 
C) Trading securities. 
D) Realizable securities. 
E) Liquid securities.

Question 10

Landmark Corp. buys $300,000 of Schroeter Company's 8% five-year bonds at par value on September 1. Interest payments are made semiannually. All of the following regarding accounting for the securities are true except:

Accepted Answer

A) The debt securities should be recorded at the cost $300,000. 
B) The securities will have a maturity value of $300,000. 
C) The semiannual interest payment amount is $12,000. 
D) The semiannual interest payment amount is $24,000. 
E) Interest Revenue should be credited when an interest payment is received. 
A) The debt securities should be recorded at the cost $300,000. 
B) The securities will have a maturity value of $300,000. 
C) The semiannual interest payment amount is $12,000. 
D) The semiannual interest payment amount is $24,000. 
E) Interest Revenue should be credited when an interest payment is received.

Question 11

In the current year, Logic Co. purchased bonds of Waterford Co. with a cost of $125,000 and a year-end fair value of $123,700. Logic also purchased 1,500 shares of Jasper Co. common stock with a cost of $25,000 and a year-end fair 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.

Accepted Answer

The answer of In the current year, Logic Co. purchased...

Question 12

A company paid $37,800 plus a broker's fee of $525 to acquire 8% bonds with a $40,000 maturity value as a long-term investment. The company intends to hold the bonds to maturity. The correct entry to record the purchase of the bond investment is:

Accepted Answer

A) Debit Long-Term Investments-HTM $37,800; credit Cash $37,800. 
B) Debit Long-Term Investments-HTM $38,325; credit Cash $38,325. 
C) Debit Cash $40,000; credit Long-Term Investments-HTM $40,000. 
D) Debit Long-Term Investments-HTM $37,800; debit Investment Expense $525; credit Cash $38,325. 
E) Debit Long-Term Investments-HTM $37,800; debit Loss on Investment $525; credit Cash $38,325. 
A) Debit Long-Term Investments-HTM $37,800; credit Cash $37,800. 
B) Debit Long-Term Investments-HTM $38,325; credit Cash $38,325. 
C) Debit Cash $40,000; credit Long-Term Investments-HTM $40,000. 
D) Debit Long-Term Investments-HTM $37,800; debit Investment Expense $525; credit Cash $38,325. 
E) Debit Long-Term Investments-HTM $37,800; debit Loss on Investment $525; credit Cash $38,325.

Question 13

Hubbard Company had the following trading securities in its portfolio at December 31. The Fair Value Adjustment-Trading account had a balance of zero prior to year-end adjustment. Prepare the appropriate adjusting journal entry.

Accepted Answer

The answer of Hubbard Company had the following trading securities...

Question 14

Element Company had the following long-term available-for-sale securities in its portfolio at December 31 for each of the years listed. The year-end cost and fair values for its portfolio follow. Beginning with Year 1, prepare the appropriate journal entry to record each year-end market adjustment for these securities.

Accepted Answer

@#IMG-DLM& Year 1: $404,500 - $389,900 = $14,600 l

Question 15

Profit margin is net sales divided by net income.

Accepted Answer

A) True 
 B)False

Question 16

McVeigh Corp. owns 40% of Gondor Company's common stock. McVeigh received $41,200 in cash dividends from Gondor. The entry to record this transaction should include a:

Accepted Answer

A) Debit to Dividends for $103,000. 
B) Credit to Long-Term Investments for $41,200. 
C) Debit to Dividend Revenue for $41,200. 
D) Credit to Long-Term Investments for $103,000. 
E) Credit to Cash for $41,200. 
A) Debit to Dividends for $103,000. 
B) Credit to Long-Term Investments for $41,200. 
C) Debit to Dividend Revenue for $41,200. 
D) Credit to Long-Term Investments for $103,000. 
E) Credit to Cash for $41,200.

Question 17

When using the equity method, receipt of cash dividends increases the carrying (book) value of an investment in equity securities.

Accepted Answer

A) True 
 B)False

Question 18

__________________________ are investments in securities that are not readily convertible to cash, or are not intended to be converted to cash in the short-term.

Accepted Answer

Long-term

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

Foreign exchange rates fluctuate due to changing _______________ and ___________ conditions.

Accepted Answer

economic ;

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

Debt securities are recorded at cost when purchased, and interest revenue for investments in debt securities is recorded when earned.

Explain how transactions (both sales and purchases) in a foreign currency are recorded and reported.

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

Management's intent determines whether an available-for-sale security is classified as long-term or short-term.

What are the accounting basics for debt securities, including recording their acquisition, interest earned, and their disposal?

A company has net income of $130,500. Its net sales are $1,740,000 and its average total assets are $2,750,000. Its profit margin equals 7.5%. Profit margin = $130,500/$1,740,000 = 7.5%

Profit margin reflects the percent of net income in each dollar of net sales.

Investments in debt and equity securities that the company actively manages and trades for profit are referred to as short-term investments in:

Landmark Corp. buys $300,000 of Schroeter Company's 8% five-year bonds at par value on September 1. Interest payments are made semiannually. All of the following regarding accounting for the securities are true except:

A company paid $37,800 plus a broker's fee of $525 to acquire 8% bonds with a $40,000 maturity value as a long-term investment. The company intends to hold the bonds to maturity. The correct entry to record the purchase of the bond investment is:

Hubbard Company had the following trading securities in its portfolio at December 31. The Fair Value Adjustment-Trading account had a balance of zero prior to year-end adjustment. Prepare the appropriate adjusting journal entry.

Profit margin is net sales divided by net income.

McVeigh Corp. owns 40% of Gondor Company's common stock. McVeigh received $41,200 in cash dividends from Gondor. The entry to record this transaction should include a:

When using the equity method, receipt of cash dividends increases the carrying (book) value of an investment in equity securities.

__________________________ are investments in securities that are not readily convertible to cash, or are not intended to be converted to cash in the short-term.

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

Foreign exchange rates fluctuate due to changing _____ and _ conditions.

Introducing Financial Accounting

Accounting System and Financial Statements

Adjusting Accounts for Financial Statements

Reporting and Analyzing Merchandising Operations

Reporting and Analyzing Inventories

Reporting and Analyzing Cash and Internal Controls

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Term Assets

Reporting and Analyzing Current Liabilities

Reporting and Analyzing Long-Term Liabilities

Reporting and Analyzing Equity

Reporting and Analyzing Cash Flows

Analyzing and Interpreting Financial Statements

Applying Present and Future Values

Reporting and Analyzing Partnerships

Filters

Exam 15: Investments and International Operations

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

Debt securities are recorded at cost when purchased, and interest revenue for investments in debt securities is recorded when earned.

Explain how transactions (both sales and purchases) in a foreign currency are recorded and reported.

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

Management's intent determines whether an available-for-sale security is classified as long-term or short-term.

What are the accounting basics for debt securities, including recording their acquisition, interest earned, and their disposal?

A company has net income of $130,500. Its net sales are $1,740,000 and its average total assets are $2,750,000. Its profit margin equals 7.5%. Profit margin = $130,500/$1,740,000 = 7.5%

Profit margin reflects the percent of net income in each dollar of net sales.

Investments in debt and equity securities that the company actively manages and trades for profit are referred to as short-term investments in:

Landmark Corp. buys $300,000 of Schroeter Company's 8% five-year bonds at par value on September 1. Interest payments are made semiannually. All of the following regarding accounting for the securities are true except:

A company paid $37,800 plus a broker's fee of $525 to acquire 8% bonds with a $40,000 maturity value as a long-term investment. The company intends to hold the bonds to maturity. The correct entry to record the purchase of the bond investment is:

Hubbard Company had the following trading securities in its portfolio at December 31. The Fair Value Adjustment-Trading account had a balance of zero prior to year-end adjustment. Prepare the appropriate adjusting journal entry.

Profit margin is net sales divided by net income.

McVeigh Corp. owns 40% of Gondor Company's common stock. McVeigh received $41,200 in cash dividends from Gondor. The entry to record this transaction should include a:

When using the equity method, receipt of cash dividends increases the carrying (book) value of an investment in equity securities.

__________________________ are investments in securities that are not readily convertible to cash, or are not intended to be converted to cash in the short-term.

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

Foreign exchange rates fluctuate due to changing _______________ and ___________ conditions.

Introducing Financial Accounting

Accounting System and Financial Statements

Adjusting Accounts for Financial Statements

Reporting and Analyzing Merchandising Operations

Reporting and Analyzing Inventories

Reporting and Analyzing Cash and Internal Controls

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Term Assets

Reporting and Analyzing Current Liabilities

Reporting and Analyzing Long-Term Liabilities

Reporting and Analyzing Equity

Reporting and Analyzing Cash Flows

Analyzing and Interpreting Financial Statements

Applying Present and Future Values

Reporting and Analyzing Partnerships

Filters

Foreign exchange rates fluctuate due to changing _____ and _ conditions.