Question 1

Investments in trading securities are accounted for using the equity method with consolidation.

Accepted Answer

A) True 
 B)False

Question 2

A controlling investor is called the parent, and the investee company is called the subsidiary.

Accepted Answer

A) True 
 B)False

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

A decrease in the fair value of a security that has not yet been realized through an actual sale of the security is called a(n):

Accepted Answer

A) Contingent loss. 
B) Realizable loss. 
C) Unrealized loss. 
D) Capitalized loss. 
E) Market loss. 
A) Contingent loss. 
B) Realizable loss. 
C) Unrealized loss. 
D) Capitalized loss. 
E) Market loss.

Question 5

On October 31, Augustas Co. received cash dividends of $0.15 per share from its investment in Lamb Corp.'s common stock. Augustas owned 1,200 shares of Lamb Corp.'s stock on October 31. The investment is considered available-for-sale. Prepare the investor's journal entry to record the receipt of the cash dividends.

Accepted Answer

The answer of On October 31, Augustas Co. received cash...

Question 6

All of the following statements relating to accounting for international operations are true except:

Accepted Answer

A) Foreign exchange gains or losses can occur when accounting for international sales transactions. 
B) Gains and losses from foreign exchange transactions are accumulated in the Fair Value Adjustment Account and are reported on the balance sheet. 
C) Gains and losses from foreign exchange transactions are accumulated in the Foreign Exchange Gain (or Loss) account. 
D) The balance in the Foreign Exchange Gain (or Loss) account is reported on the income statement. 
E) Foreign exchange gains or losses can occur when accounting for international purchases transactions. 
A) Foreign exchange gains or losses can occur when accounting for international sales transactions. 
B) Gains and losses from foreign exchange transactions are accumulated in the Fair Value Adjustment Account and are reported on the balance sheet. 
C) Gains and losses from foreign exchange transactions are accumulated in the Foreign Exchange Gain (or Loss) account. 
D) The balance in the Foreign Exchange Gain (or Loss) account is reported on the income statement. 
E) Foreign exchange gains or losses can occur when accounting for international purchases transactions.

Question 7

Washington Corp. held 1,500 of Vashon Company 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 Washington's sale.

Accepted Answer

The answer of Washington Corp. held 1,500 of Vashon Company...

Question 8

Barnes Company holds $50,000 of 8% bonds that mature in six years as a held-to-maturity security. Which of the following is the correct journal entry to record the receipt of the semiannual interest payment?

Accepted Answer

A) debit Cash, $4,000; credit Long-Term Investments-HTM, $4,000. 
B) debt Cash, $2,000; credit Long-Term Investments-HTM, $2000. 
C) debit Cash, $2,000; credit Interest Revenue, $2,000. 
D) debit Unrealized Gain-Equity, $2,000; credit Cash, $2,000. 
E) debit Cash, $4,000; credit Unrealized Gain-Equity, $4,000. 
A) debit Cash, $4,000; credit Long-Term Investments-HTM, $4,000. 
B) debt Cash, $2,000; credit Long-Term Investments-HTM, $2000. 
C) debit Cash, $2,000; credit Interest Revenue, $2,000. 
D) debit Unrealized Gain-Equity, $2,000; credit Cash, $2,000. 
E) debit Cash, $4,000; credit Unrealized Gain-Equity, $4,000.

Question 9

Bharrat Corporation purchased 40% of Ferris Corporation for $100,000 on January 1. On October 17 of the same year, Ferris Corporation declared total cash dividends of $12,000. At year-end, Ferris Corporation reported net income of $60,000. The balance in the Bharrat Corporation's Long-Term Investment-Ferris account at December 31 should be:

Accepted Answer

A) $80,800. 
B) $100,000. 
C) $95,200. 
D) $119,200. 
E) $124,000. 
A) $80,800. 
B) $100,000. 
C) $95,200. 
D) $119,200. 
E) $124,000.

Question 10

A company reported net income for Year 1 of $98,000 and $106,000 for Year 2. It also reported net sales of $835,000 in Year 1 and $918,000 in Year 2. The company's average total assets in Year 1 were $1,850,000 and $1,720,000 in Year 2. Calculate the company's profit margin, total asset turnover and return on total assets for Year 1 and Year 2. Comment on the results.

Accepted Answer

@#IMG-DLM& The company did not increase its profit

Question 11

On April 1 of the current year, a company paid $150,000 cash to purchase 7%, 10-year bonds with a par value of $150,000; interest is paid semiannually each April 1 and October 1. The company intends to hold these bonds until they mature. Prepare the journal entries to record the bond purchase, the receipt of the first semiannual interest payment on October 1 of the current year, and the accrual of interest for the year-end December 31.

Accepted Answer

The answer of On April 1 of the current year,...

Question 12

Multinational corporations can be U.S. companies with operations in other countries.

Accepted Answer

A) True 
 B)False

Question 13

If the exchange rate for Canadian and U.S. dollars is 0.7382 to 1, this implies that 2 Canadian dollars can be purchased for $1.48 U.S. dollars.
$2 * 0.7382 = $1.48

Accepted Answer

A) True 
 B)False

Question 14

On January 2, Froxel Company purchased 10,000 shares of Sandia Corp. common stock at $19 per share plus a $3,000 commission. This represents 30% of Sandia Corp.'s outstanding stock. On August 6, Sandia Corp. declared and paid cash dividends of $1.75 per share, and on December 31 it reported net income of $150,000. Prepare the necessary entries for Froxel to account for these transactions and events.

Accepted Answer

The answer of On January 2, Froxel Company purchased 10,000...

Question 15

A company paid $37,800 plus a broker's fee of $525 to acquire 8% bonds with a $40,000 maturity value. The company intends to hold the bonds to maturity. The cash proceeds the company will receive when the bonds mature equal:

Accepted Answer

A) $37,800. 
B) $38,325. 
C) $40,000. 
D) $40,525. 
E) $43,200. 
A) $37,800. 
B) $38,325. 
C) $40,000. 
D) $40,525. 
E) $43,200.

Question 16

A company received dividends of $0.35 per share on 300 shares of stock it holds as an investment. The journal entry to record this transaction would be to debit Cash for $105 and credit Dividend Revenue for $105.

Accepted Answer

A) True 
 B)False

Question 17

All of the following statements regarding accounting for trading securities under U.S. GAAP are true except:

Accepted Answer

A) The entire portfolio of trading securities is reported at is fair value. 
B) An unrealized gain or loss from a change in fair value is reported on the income statement. 
C) An unrealized gain or loss is recorded with an adjusting entry when the securities are sold. 
D) An unrealized gain or loss is recorded with an adjusting entry at the end of each period. 
E) Unrealized gains and losses are recorded in a temporary account that is closed to Income Summary at the end of the period. 
A) The entire portfolio of trading securities is reported at is fair value. 
B) An unrealized gain or loss from a change in fair value is reported on the income statement. 
C) An unrealized gain or loss is recorded with an adjusting entry when the securities are sold. 
D) An unrealized gain or loss is recorded with an adjusting entry at the end of each period. 
E) Unrealized gains and losses are recorded in a temporary account that is closed to Income Summary at the end of the period.

Question 18

Foreign exchange rates fluctuate due to many factors including changing political and economic conditions.

Accepted Answer

A) True 
 B)False

Question 19

Consolidated financial statements show the financial position, results of operations, and cash flows of all entities under the parent's control, including all subsidiaries.

Accepted Answer

A) True 
 B)False

Question 20

All of the following are true about debt securities except:

Accepted Answer

A) They can be short-term investments. 
B) They can be long-term investments. 
C) They can have a cost higher than the maturity value. 
D) They can have a cost lower than the maturity value. 
E) The reflect an owner relationship. 
A) They can be short-term investments. 
B) They can be long-term investments. 
C) They can have a cost higher than the maturity value. 
D) They can have a cost lower than the maturity value. 
E) The reflect an owner relationship.

Investments in trading securities are accounted for using the equity method with consolidation.

A controlling investor is called the parent, and the investee company is called the subsidiary.

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

A decrease in the fair value of a security that has not yet been realized through an actual sale of the security is called a(n):

All of the following statements relating to accounting for international operations are true except:

Washington Corp. held 1,500 of Vashon Company 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 Washington's sale.

Barnes Company holds $50,000 of 8% bonds that mature in six years as a held-to-maturity security. Which of the following is the correct journal entry to record the receipt of the semiannual interest payment?

Multinational corporations can be U.S. companies with operations in other countries.

If the exchange rate for Canadian and U.S. dollars is 0.7382 to 1, this implies that 2 Canadian dollars can be purchased for $1.48 U.S. dollars. $2 * 0.7382 = $1.48

A company paid $37,800 plus a broker's fee of $525 to acquire 8% bonds with a $40,000 maturity value. The company intends to hold the bonds to maturity. The cash proceeds the company will receive when the bonds mature equal:

A company received dividends of $0.35 per share on 300 shares of stock it holds as an investment. The journal entry to record this transaction would be to debit Cash for $105 and credit Dividend Revenue for $105.

All of the following statements regarding accounting for trading securities under U.S. GAAP are true except:

Foreign exchange rates fluctuate due to many factors including changing political and economic conditions.

Consolidated financial statements show the financial position, results of operations, and cash flows of all entities under the parent's control, including all subsidiaries.

All of the following are true about debt securities except:

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

Investments in trading securities are accounted for using the equity method with consolidation.

A controlling investor is called the parent, and the investee company is called the subsidiary.

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

A decrease in the fair value of a security that has not yet been realized through an actual sale of the security is called a(n):

All of the following statements relating to accounting for international operations are true except:

Washington Corp. held 1,500 of Vashon Company 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 Washington's sale.

Barnes Company holds $50,000 of 8% bonds that mature in six years as a held-to-maturity security. Which of the following is the correct journal entry to record the receipt of the semiannual interest payment?

Multinational corporations can be U.S. companies with operations in other countries.

If the exchange rate for Canadian and U.S. dollars is 0.7382 to 1, this implies that 2 Canadian dollars can be purchased for $1.48 U.S. dollars. $2 * 0.7382 = $1.48

A company paid $37,800 plus a broker's fee of $525 to acquire 8% bonds with a $40,000 maturity value. The company intends to hold the bonds to maturity. The cash proceeds the company will receive when the bonds mature equal:

A company received dividends of $0.35 per share on 300 shares of stock it holds as an investment. The journal entry to record this transaction would be to debit Cash for $105 and credit Dividend Revenue for $105.

All of the following statements regarding accounting for trading securities under U.S. GAAP are true except:

Foreign exchange rates fluctuate due to many factors including changing political and economic conditions.

Consolidated financial statements show the financial position, results of operations, and cash flows of all entities under the parent's control, including all subsidiaries.

All of the following are true about debt securities except:

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