Exam 15: Investments and International Operations

Investments in trading securities:

Long-term investments cannot include:

Landmark Corp. buys $300,000 of Schroeter Company's 8% five-year bonds payable at par value on September 1. Interest payments are made semiannually. Landmark plans to hold the bonds for the five year life. When the bonds mature, the journal entry to record the proceeds will be:

FreshFoods, Inc. sells American gourmet foods to merchandisers in Singapore. Prepare the journal entries for FreshFoods, to record the following transactions. Include any year-end adjustments.

Maroon 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. Maroon must record a loss of $450

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

Strickland Corporation has invested in 10% of the outstanding stock of Nez Corporation. Strickland intends to actively manage this investment for profit. This investment is classified as:

What is comprehensive income and how is it usually reported in the financial statements?

Available-for-sale debt securities are:

Kendall Corp. purchased at par value $75,000 of Shrem Company's 8% bonds that mature in three-years. The bonds pay interest semiannually on June 1 and December 1. Kendall plans to hold the bonds until they mature. When the bonds mature, Kendall should prepare the following journal entry:

Select the correct statement from the following:

When the cost of a short-term held-to-maturity debt security is different from the maturity value, the difference is amortized over the remaining life of the security.

A controlling influence over the investee is based on the investor owning voting stock exceeding:

When an investment in an equity security is sold, the sale proceeds are compared with the cost, and if the cost is greater than the proceeds, a gain on the sale of the security is recorded.

Kreighton Manufacturing purchased on credit £50,000 worth of production materials from a British company when the exchange rate was $1.97 per British pound. At the year-end balance sheet date the exchange rate increased to $2.76. If the liability is still unpaid at that time, Kreighton must record a:

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 total asset turnover equals 4.7%. Asset turnover = $1,740,000/$2,750,000 = 0.63 or 63%

When one company owns more than 50% of another company's voting stock and has control over the investee company, the investee is called the _______________________.

To prepare consolidated financial statements when a U. S. parent company has an international subsidiary, the international subsidiary's financial statements must be translated into U.S. dollars.

On May 1 of the current year, a company paid $200,000 cash to purchase 6%, 10-year bonds with a par value of $200,000; interest is paid semiannually each May 1 and November 1. The company intends to hold these bonds until they mature. Prepare the journal entry to record the bond purchase.

On January 3, Kostansas Corporation purchased 5,000 shares of Morton, Inc. for $40 per share plus $700 in broker commissions. These shares represent a 40% ownership in Morton, Inc. Prepare the journal entry Kostansas Corporation should record for the investment transaction.