Question 1

Bawl Corp.acquired 100 shares of Darkness,Inc.for $75 per share for its trading portfolio.At December 31,2014,the value of the stock was $95 per share.How would Bawl record the adjustment to fair value?

Accepted Answer

A) Debit Fair Value Adjustment-Trading for $2,000 and credit Unrealized Gain-Equity for $2,000. 
B) Debit Fair Value Adjustment-Trading for $2,000 and credit Unrealized Gain-Income for $2,000. 
C) Debit Unrealized Gain-Equity for $2,000 and credit Fair Value Adjustment-Trading for $2,000. 
D) Debit Unrealized Gain-Income for $2,000 and credit Fair Value Adjustment-Trading for $2,000. 
E) Debit Short-Term Investments-Trading for $95,000 and credit Unrealized Gain-Equity for $95,000.

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

Short-term investments are readily convertible to cash and are intended to be converted into cash within one year or the operating cycle,whichever is longer.

Accepted Answer

A) True 
 B)False

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

Investments in equity securities where the investor has a controlling influence are accounted for using the ________________________________.

Accepted Answer

The answer of Investments in equity securities where the investor...

Question 6

Accounting for long-term investments in held-to-maturity securities requires companies to record interest revenue as it accrues.

Accepted Answer

A) True 
 B)False

Question 7

On January 2,2014,Palmer Corp.paid $500,000 cash to acquire 400,000 shares of stock in Prescott Corp.These shares represent 40% of Prescott's total outstanding stock.How would Palmer record this transaction using the equity method?

Accepted Answer

A) Debit Cash for $500,000 and credit Long-Term Investments-Prescott for $500,000. 
B) Debit Long-Term Investments-Prescott for $500,000 and credit Cash for $500,000. 
C) Debit Long-Term Investments-AFS (Prescott) for $500,000 and credit Cash for $500,000. 
D) Debit Cash for $500,000 and credit Long-Term Investments-AFS (Prescott) for $500,000. 
E) Debit Short-Term Investments-AFS (Prescott) for $500,000 and credit Cash for $500,000.

Question 8

A company had investments in long-term available-for-sale securities.At the end of the current year,the company's portfolio had a $162,000 cost and $164,000 market value. What is the current year's adjustment to market value given the following account balances at the end of the prior year?

Accepted Answer

A)   
B)   
C)   
D)   
E)

Question 9

On January 2,2014,Parade Corp.paid $50,000 cash to acquire 400,000 shares of stock in Band Corp.These shares represent 40% of Band Corp.'s total outstanding stock.Parade accounted for this acquisition using the equity method.On December 31,2014,Band Corp.paid $2,000 in dividends to Parade.How would the company record this transaction?

Accepted Answer

A) Debit Cash for $2,000 and credit Dividend Revenue for $2,000. 
B) Debit Cash for $2,000 and credit Interest Revenue for $2,000. 
C) Debit Cash for $2,000 and credit Unrealized Gain on Long-Term Investments-Band for $2,000. 
D) Debit Cash for $2,000 and credit Long-Term Investments-Band for $2,000. 
E) Debit Cash for $2,000 and credit Long-Term Investments-Available-for-Sale (Band) for $2,000.

Question 10

An investor with significant influence owns as least 20%,but not more than 50%,of another company's voting stock.

Accepted Answer

A) True 
 B)False

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

On June 15,2014,Bellows Corp.acquired 100 shares of Sonny,Inc.for $75 per share as a trading security.On December 17,2014,Bellows sold the stock for $115 per share.How would the company record this transaction?

Accepted Answer

A) Debit Cash for $11,500,credit Short-Term Investments-Trading for $7,500,and credit Gain on Sale of Short-Term Investments for $4,000. 
B) Debit Cash for $11,500,credit Long-Term Investments-Trading for $7,500,and credit Gain on Sale of Long-Term Investments for $4,000. 
C) Debit Cash for $11,500,credit Short-Term Investments-Trading for $7,500,and credit Fair Value Adjustment-Trading for $4,000. 
D) Debit Cash for $11,500,credit Long-Term Investments-Trading for $7,500,and credit Fair Value Adjustment-Trading for $4,000. 
E) Debit Fair Value Adjustment-Trading for $4,000 and credit Gain on Sale of Short-Term Investments for $4,000.

Question 13

What are the accounting basics for equity securities,including acquisition,dividends earned,and disposition?

Accepted Answer

The answer of What are the accounting basics for equity...

Question 14

An increase in the price of the U.S.dollar against other currencies puts U.S.companies in a stronger competitive position internationally.

Accepted Answer

A) True 
 B)False

Question 15

A company had net income of $2,785,000,net sales of $250,000,000,average total assets of $6,000,000,and equity investments of $40,000.Its return on total assets equals:

Accepted Answer

A) $3,215,000 
B) 41.67% 
C) 21.54% 
D) 69.63% 
E) 46.42%

Question 16

The following information is available from the financial statements of Cosmotropolis:
  What is Cosmotropolis' return on total assets for 2014?

Accepted Answer

The answer of The following information is available from the...

Question 17

The following information is available from the financial statements of Cosmotropolis:
  What is Cosmotropolis' return on total assets for 2013?

Accepted Answer

The answer of The following information is available from the...

Question 18

Held-to-maturity securities are equity securities a company intends and is able to hold until maturity.

Accepted Answer

A) True 
 B)False

Question 19

Trading securities are securities that are purchased by trading other securities rather than by paying cash.

Accepted Answer

A) True 
 B)False

Question 20

The currency in which a company presents its financial statements is known as the:

Accepted Answer

A) Multinational currency 
B) Price-level-adjusted currency 
C) Specific currency 
D) Reporting currency 
E) Historical cost currency

Exam 15: Investments and International Operations

Bawl Corp.acquired 100 shares of Darkness,Inc.for $75 per share for its trading portfolio.At December 31,2014,the value of the stock was $95 per share.How would Bawl record the adjustment to fair value?

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

Short-term investments are readily convertible to cash and are intended to be converted into cash within one year or the operating cycle,whichever is longer.

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

Investments in equity securities where the investor has a controlling influence are accounted for using the ________________________________.

Accounting for long-term investments in held-to-maturity securities requires companies to record interest revenue as it accrues.

On January 2,2014,Palmer Corp.paid $500,000 cash to acquire 400,000 shares of stock in Prescott Corp.These shares represent 40% of Prescott's total outstanding stock.How would Palmer record this transaction using the equity method?

A company had investments in long-term available-for-sale securities.At the end of the current year,the company's portfolio had a $162,000 cost and $164,000 market value. What is the current year's adjustment to market value given the following account balances at the end of the prior year?

An investor with significant influence owns as least 20%,but not more than 50%,of another company's voting stock.

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

On June 15,2014,Bellows Corp.acquired 100 shares of Sonny,Inc.for $75 per share as a trading security.On December 17,2014,Bellows sold the stock for $115 per share.How would the company record this transaction?

What are the accounting basics for equity securities,including acquisition,dividends earned,and disposition?

An increase in the price of the U.S.dollar against other currencies puts U.S.companies in a stronger competitive position internationally.

A company had net income of $2,785,000,net sales of $250,000,000,average total assets of $6,000,000,and equity investments of $40,000.Its return on total assets equals:

The following information is available from the financial statements of Cosmotropolis: What is Cosmotropolis' return on total assets for 2014?

The following information is available from the financial statements of Cosmotropolis: What is Cosmotropolis' return on total assets for 2013?

Held-to-maturity securities are equity securities a company intends and is able to hold until maturity.

Trading securities are securities that are purchased by trading other securities rather than by paying cash.

The currency in which a company presents its financial statements is known as the: