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Exam 15: Investments and International Operations

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Question 51

Multiple Choice

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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?

A)
B)
C)
D)
E)

F) None of the above
G) C) and D)

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Question 52

Multiple Choice

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Chung owns 40% of Lu's common stock. Lu pays $97,000 in total cash dividends to its shareholders. Chung's entry to record this transaction should include a:

A) Debit to Dividends for $97,000.
B) Debit to Dividends for $38,800.
C) Debit to Long-Term investments for $97,000.
D) Credit to Long-Term Investments for $38,800.
E) Credit to Cash for $97,000.

F) C) and D)
G) B) and D)

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Question 53

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What are the accounting basics for debt securities, including recording their acquisition, interest earned and their disposal?

Investments in trading securities:

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

All companies desire a low return on total assets.

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

Short-term investments in held-to-maturity debt securities are accounted for using the ___________________________.

A company's return on total assets equals 30%. If net income and net sales are $900,000 and $8,900,000 respectively, what is the amount of total assets?

Marina, Inc., held 1,500 of Navia 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 the necessary journal entry to record this sale.

Savan Co. purchased 14,000 shares of Briton Corporation's 40,000 shares of common stock on December 31, 2012. This represented 35% of Briton's outstanding shares and gave Savan Co. significant influence over Briton's management and operations. On October 11, 2013, Briton declared and paid cash dividends of $30,000. On December 31, 2013, Briton reported net income of $125,000 for the year. Prepare the journal entries Savan Co. should record to account for its investment in Briton Corporation during 2013.

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

Match the following definitions to their terms

A company had net income of $2,660,000, net sales of $25,000,000, and average total assets of $8,000,000. Its return on total assets is equal to:

Explain the difference between short-term and long-term investments and give examples of each.

The controlling investor is referred to as the:

A controlling investor is referred to as the parent and the investee company is referred to as the subsidiary.

Investments in held-to-maturity debt securities are always current assets.

At acquisition, debt securities are:

On April 1 of the current year, a company paid $150,000 to purchase 7%, 10-year bonds that had a par value of $150,000 and paid interest semiannually each April 1 and October 1. The company intends to hold the bonds until they mature. Prepare the journal entry to record the receipt of the first semiannual interest payment on October 1 of the current year.