Question 1

(Communication)
Kalyn Gise is the daughter of Mark Gise, the founder and president of Carolina Blue Sky Enterprises. She has been working in various departments during school vacations throughout high school. She burst into the accounting department excitedly one morning. She said that the stock price of several of the firm's temporary investments are up, and that her father said that the company had made over $10,000 because of this jump in stock prices. She asks to see how the increase is recorded. It is a very busy time in the accounting department, and so her question is deferred.
Required:
Prepare a brief note to answer Kalyn question.

Accepted Answer

The answer of (Communication)
Kalyn Gise is the daughter of Mark...

Question 2

Hale Corporation issues an 8%, 9-year mortgage note on January 1 2014, to obtain financing for new equipment. The terms provide for semiannual installment payments of $32,900. The following values related to the time value of money were available to Hale to help them with their planning process and compounded interest decisions.  To the closest dollar, what were the cash proceeds received from the issuance of the note?

Accepted Answer

A)  $205,523 
B)  $236,880 
C)  $416,491 
D)  $410,841

Question 3

Which table has a factor of 1.00000 for 1 period at every interest rate?

Accepted Answer

A)  Future value of 1 
B)  Future value of an annuity of 1 
C)  Present value of 1 
D)  Present value of an annuity of 1

Question 4

Charleston Co. purchased 60, 6% APS Company bonds for $60,000 cash plus brokerage fees of $500. Interest is payable semiannually on July 1 and January 1. The entry to record the December 31 interest accrual would include a

Accepted Answer

A)  debit to Interest Receivable for $1,800. 
B)  debit to Interest Revenue for $1,800. 
C)  credit to Interest Revenue for $3,600. 
D)  debit to Debt Investments for $1,800.

Question 5

SCI Company deposits $15,000 in a fund at the end of each year for 7 years. The fund pays interest of 3% compounded annually. The balance in the fund at the end of 7 years is computed by multiplying

Accepted Answer

A)  $15,000 by the future value of 1 factor. 
B)  $75,000 by 1.07. 
C)  $75,000 by 1.70. 
D)  $15,000 by the future value of an annuity factor.

Question 6

Ashland Corporation sells 100 shares of common stock being held as an investment. The shares were acquired six months ago at a cost of $30 a share. Ashl and Keller sold the shares for $38 a share. The entry to record the sale is

Accepted Answer

A)  
B)  
C)  
D)

Question 7

Under the equity method, the receipt of dividends from the investee company results in a credit to the Dividend Revenue account.

Accepted Answer

A) True 
 B)False

Question 8

The following transactions were made by Coral Company. Assume all investments are short-term.
June 2 Purchased 600 shares of Schmidt Corporation common stock for $45 per share.
July 1 Purchased 210 Dantzler Corporation bonds for $210,000.
30 Received a cash dividend of $2.25 per share from the Schmidt Corporation.
Sept. 15 Sold 120 shares of Schmidt Corporation stock for $50 per share.
Dec. 31 Received semiannual interest check for $9,240 from the Dantzler Corporation.
31 Received a cash dividend of $2.25 per share from the Schmidt Corporation.
Instructions
Journalize the transactions.

Accepted Answer

The answer of The following transactions were made by Coral...

Question 9

Which of the following would not be classified as a short-term investment?

Accepted Answer

A)  Short-term commercial paper. 
B)  Idle cash in a bank checking account. 
C)  Marketable equity securities. 
D)  Marketable debt securities.

Question 10

In computing the present value of an annuity, it is necessary to know only the discount rate and the amount of the periodic receipts or payments.

Accepted Answer

A) True 
 B)False

Question 11

When should a long-term investment in common stock be accounted for by the equity method?
(b) When is revenue recognized under the equity method?

Accepted Answer

The answer of When should a long-term investment in common...

Question 12

Grafton Company had the following transactions pertaining to its short-term stock investments.
Jan. 1 Purchased 2,000 shares of Hortez Company stock for $101,100 cash.
June 1 Received cash dividends of $2.70 per share on the Hortez Company stock.
Sept. 15 Sold 1,000 shares of the Hortez Company stock for $49,600.
Dec. 31 The fair values of the securities were $50,800. Prepare the adjusting entry to report the portfolio at fair value.
Instructions
(a) Journalize the transactions.
(b) Indicate the income statement effects of the transactions.

Accepted Answer

The answer of Grafton Company had the following transactions pertaining...

Question 13

A purchase of common stock of Blue Wave Corporation for $14,500 was sold three months later for $15,000. The entry to record the sale would include a

Accepted Answer

A)  debit to Cash of $14,500. 
B)  credit to Gain on Sale of Stock Investments of $500. 
C)  credit to Stock Investments of $15,000. 
D)  credit to Interest Revenue of $500.

Question 14

Rhode Company is about to issue $4,000,000 of 5-year bonds, with a contract rate of interest of 8%, payable semiannually. The discount rate for such securities is 10%. How much can Rhode expect to receive from the sale of these bonds?

Accepted Answer

A)  $3,691,117 
B)  $4,000,000 
C)  $4,324,440 
D)  $3,308,880

Question 15

In recognizing a decline in the fair value of short-term stock investments, an Unrealized Loss account is debited because

Accepted Answer

A)  management intends to realize this loss in the near future. 
B)  the securities have not been sold. 
C)  the stock market is volatile. 
D)  management cannot determine the exact amount of the loss in value.

Question 16

On January 1, Ollinger Company purchased a 25% equity investment in Fava Company for $300,000. At December 31 Fava declared and paid a $20,000 dividend and reported net income of $120,000.
Instructions
(a) Journalize the transactions
(b) Determine the amount to be reported as an investment in Fava stock at December 31.

Accepted Answer

The answer of On January 1, Ollinger Company purchased a...

Question 17

The amount of interest involved in any financing transaction is based on two elements, principal and interest rate.

Accepted Answer

A) True 
 B)False

Question 18

The Fair Value Adjustment account is a(n)

Accepted Answer

A)  offset account. 
B)  adjustment account. 
C)  valuation allowance account. 
D)  opposite account.

Question 19

When an investor owns between 20% and 50% of the common stock of a corporation, it is generally presumed that the investor

Accepted Answer

A)  has insignificant influence on the investee and that the cost method should be used to account for the investment. 
B)  should apply the cost method in accounting for the investment. 
C)  will prepare consolidated financial statements. 
D)  has significant influence on the investee and that the equity method should be used to account for the investment.

Question 20

Which one of the following would not be classified as a short-term investment?

Accepted Answer

A)  Marketable equity securities. 
B)  Marketable merchandise. 
C)  Marketable debt securities. 
D)  Short-term paper.

Exam 14: Time Value of Money

Which table has a factor of 1.00000 for 1 period at every interest rate?

Charleston Co. purchased 60, 6% APS Company bonds for $60,000 cash plus brokerage fees of $500. Interest is payable semiannually on July 1 and January 1. The entry to record the December 31 interest accrual would include a

SCI Company deposits $15,000 in a fund at the end of each year for 7 years. The fund pays interest of 3% compounded annually. The balance in the fund at the end of 7 years is computed by multiplying

Ashland Corporation sells 100 shares of common stock being held as an investment. The shares were acquired six months ago at a cost of $30 a share. Ashl and Keller sold the shares for $38 a share. The entry to record the sale is

Under the equity method, the receipt of dividends from the investee company results in a credit to the Dividend Revenue account.

Which of the following would not be classified as a short-term investment?

In computing the present value of an annuity, it is necessary to know only the discount rate and the amount of the periodic receipts or payments.

When should a long-term investment in common stock be accounted for by the equity method? (b) When is revenue recognized under the equity method?

A purchase of common stock of Blue Wave Corporation for $14,500 was sold three months later for $15,000. The entry to record the sale would include a

Rhode Company is about to issue $4,000,000 of 5-year bonds, with a contract rate of interest of 8%, payable semiannually. The discount rate for such securities is 10%. How much can Rhode expect to receive from the sale of these bonds?

In recognizing a decline in the fair value of short-term stock investments, an Unrealized Loss account is debited because

The amount of interest involved in any financing transaction is based on two elements, principal and interest rate.

The Fair Value Adjustment account is a(n)

When an investor owns between 20% and 50% of the common stock of a corporation, it is generally presumed that the investor

Which one of the following would not be classified as a short-term investment?