Question 1

On March 15, Alan Company purchased 10,000 shares of Cameo Corp. stock for $35,000. The investment is classified as available-for-sale securities. On June 30, the stock had a fair value of $34,000. Alan should do which of the following?

Accepted Answer

A) Record a decrease to the Fair value Adjustment-AFS account. 
B) Record an increase to the Unrealized Loss-Equity account. 
C) Report a decrease in the Gain on Sale of Investment income statement account. 
D) Report an increase in the asset section of the balance sheet. 
E) Record an increase to the Unrealized Gain-Income account.

Question 2

Cosmos Corporation had the following long-term investment transactions.  Prepare the journal entries Cosmos Corporation should record for these transactions and events.

Accepted Answer

The answer of Cosmos Corporation had the following long-term investment...

Question 3

Explain how equity securities having significant influence are accounted for and reported in the financial statements. Include a discussion of the criterion for these securities in terms of an investee's voting stock.

Accepted Answer

The answer of Explain how equity securities having significant influence...

Question 4

Identify the classifications for non-influential investments in securities. What are the accounting basics for non-influential investments in securities, including acquisition, dividends earned, and disposition?

Accepted Answer

The answer of Identify the classifications for non-influential investments in...

Question 5

________________________ refers to all changes in equity for a period except for those due to investments by and distributions to owners.

Accepted Answer

The answer of ________________________ refers to all changes in equity...

Question 6

_________________________ securities reflect a creditor relationship while ____________________ securities reflect an owner relationship.

Accepted Answer

The answer of _________________________ securities reflect a creditor relationship while...

Question 7

All companies desire a low return on total assets.

Accepted Answer

A) True 
 B)False

Question 8

Hamasaki Company owns 30% of CDW Corp. stock. Hamasaki received $6,500 in cash dividends from its investment in CDW. The entry to record receipt of these dividends includes a debit to Cash for $6,500 and a credit to Long-Term Investments for $6,500.

Accepted Answer

A) True 
 B)False

Question 9

Return on total assets is computed by dividing ___________ by __________.

Accepted Answer

The answer of Return on total assets is computed by...

Question 10

Explain how to account for available-for-sale debt and equity securities at and after acquisition and how they are reported in financial statements.

Accepted Answer

The answer of Explain how to account for available-for-sale debt...

Question 11

Landers, Inc., held 1,500 of Shipman Company common stock with a cost of $36,900. These shares were classified as a long-term available-for-sale investment. It sold the shares on December 13 for $42,100. Prepare Lander's journal entry to record this sale.

Accepted Answer

The answer of Landers, Inc., held 1,500 of Shipman Company...

Question 12

When an investor company owns more than 25% of the voting stock of an investee company, it has a controlling influence.

Accepted Answer

A) True 
 B)False

Question 13

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

Accepted Answer

The answer of ______________________ financial statements show the financial position,...

Question 14

Any cash dividends received from equity securities are recorded as Dividend Expense.

Accepted Answer

A) True 
 B)False

Question 15

Available-for-sale securities are actively managed like trading securities because the company intends to trade them for profit in the short term.

Accepted Answer

A) True 
 B)False

Question 16

Long-term investments are reported in the:

Accepted Answer

A) Current asset section of the balance sheet. 
B) Intangible asset section of the balance sheet. 
C) Non-current section of the balance sheet called long-term investments. 
D) Plant assets section of the balance sheet. 
E) Equity section of the balance sheet.

Question 17

On May 26, Clark Co. purchased 1,000 of Langston Corporation stock at $20 per share plus a $75 brokerage fee. These shares are categorized as trading securities. Clark received a $1,500 quarterly cash dividend on the Langston shares. The journal entry to record the dividend is:

Accepted Answer

A) Debit Cash 1,500; credit Interest Revenue 1,500. 
B) Debit Dividend Receivable 1,500; credit Dividend Revenue 1,500. 
C) Debit Cash 1,500; credit Dividend Receivable 1,500. 
D) Debit Cash 1,500; credit Dividend Revenue 1,500. 
E) Debit Cash 1,500; credit Investment in Langston Corp.1,500.

Question 18

On February 15, Jewel Company buys 7,000 shares of Marcelo Corp. common at $28.53 per share plus a brokerage fee of $400. The stock is classified as available-for-sale securities. On March 15, Marcelo Corp. declares a dividend of $1.15 per share payable to stockholders of record on April 15. Jewel Company received the dividend on April 15 and ultimately sells half of the Marcelo Corp. stock on November 17 of the current year for $29.30 per share less a brokerage fee of $250. The fair value of the remaining 3,500 shares is $29.50 per share. The amount that Jewel Company should report in the asset section of its year-end December 31 balance sheet for its investment in Marcelo Corp. is:

Accepted Answer

A) $200,110. 
B) $103,250. 
C) $2,245. 
D) $3,195. 
E) $5,440.

Question 19

Marjam Company owns 51,000 shares of MacKenzie Company's 100,000 outstanding shares of common stock. MacKenzie Company pays $25,000 in total cash dividends to its shareholders. Marjam's entry to record this transaction should include a:

Accepted Answer

A) Debit to Dividend Revenue for $12,750. 
B) Debit to Interest Revenue for $12,750. 
C) Credit to Long-Term investments for $12,750. 
D) Credit to Long-Term Investments for $25,000. 
E) Credit to Dividend Revenue for $25,000.

Question 20

On June 18, Wyman Company (a U.S. Company) sold merchandise to the Nielsen Company of Denmark for €60,000 (Euros), with a payment due in 60 days. If the exchange rate was $1.35 per euro on the date of sale and $1.14 per euro on the date of payment, Wyman Company should recognize a foreign exchange gain or loss in the amount of:

Accepted Answer

A) $60,000 gain. 
B) $60,000 loss. 
C) $68,400 loss. 
D) $12,600 gain. 
E) $12,600 loss.

Exam 15: Investments and International Operations

On March 15, Alan Company purchased 10,000 shares of Cameo Corp. stock for $35,000. The investment is classified as available-for-sale securities. On June 30, the stock had a fair value of $34,000. Alan should do which of the following?

Cosmos Corporation had the following long-term investment transactions. Prepare the journal entries Cosmos Corporation should record for these transactions and events.

Explain how equity securities having significant influence are accounted for and reported in the financial statements. Include a discussion of the criterion for these securities in terms of an investee's voting stock.

Identify the classifications for non-influential investments in securities. What are the accounting basics for non-influential investments in securities, including acquisition, dividends earned, and disposition?

________________________ refers to all changes in equity for a period except for those due to investments by and distributions to owners.

_____ securities reflect a creditor relationship while securities reflect an owner relationship.

All companies desire a low return on total assets.

Hamasaki Company owns 30% of CDW Corp. stock. Hamasaki received $6,500 in cash dividends from its investment in CDW. The entry to record receipt of these dividends includes a debit to Cash for $6,500 and a credit to Long-Term Investments for $6,500.

Return on total assets is computed by dividing _ by .

Explain how to account for available-for-sale debt and equity securities at and after acquisition and how they are reported in financial statements.

Landers, Inc., held 1,500 of Shipman Company common stock with a cost of $36,900. These shares were classified as a long-term available-for-sale investment. It sold the shares on December 13 for $42,100. Prepare Lander's journal entry to record this sale.

When an investor company owns more than 25% of the voting stock of an investee company, it has a controlling influence.

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

Any cash dividends received from equity securities are recorded as Dividend Expense.

Available-for-sale securities are actively managed like trading securities because the company intends to trade them for profit in the short term.

Long-term investments are reported in the:

On May 26, Clark Co. purchased 1,000 of Langston Corporation stock at $20 per share plus a $75 brokerage fee. These shares are categorized as trading securities. Clark received a $1,500 quarterly cash dividend on the Langston shares. The journal entry to record the dividend is:

Marjam Company owns 51,000 shares of MacKenzie Company's 100,000 outstanding shares of common stock. MacKenzie Company pays $25,000 in total cash dividends to its shareholders. Marjam's entry to record this transaction should include a: