Exam 19: Accounting for Investments

It is possible that an investor with less than a 50 percent ownership interest may qualify for accounting recognition of control and appropriately prepare consolidated financial statements.

An influential but noncontrolling investment is defined as ownership of between 20 to 50 percent of the stock of another company.

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

In the United States,insider trading is considered

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?

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

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

Kirk Corporation owns 25 percent of the voting stock of Allen Corporation and accounts for the investment using the equity method.Allen reports a net loss of $40,000.Kirk Corporation's entry to record its share of loss is:

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

The equity method usually is the most appropriate method for accounting for investments of more than a 20 percent interest of another company's stock.

Held-to-maturity securities are valued on the balance sheet at cost adjusted for the effects of interest.

An ownership interest of greater than 50 percent is required for an investor to have accounting control over an investee.

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

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

Trading securities are valued on the balance sheet at market value.

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

When the equity method is used to account for an investment in stock,dividends received by the investor decrease the investment account.