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Exam 26: Investments

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Question 61

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Element Company had the following long-term available-for-sale securities in its portfolio at December 31 for each of the years listed.The year-end cost and fair values for its portfolio follow.Beginning with Year 1,prepare the appropriate journal entry to record each year-end market adjustment for these securities.

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Year 1: $404,500 -$389,900 = $14,600 lo...

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Question 62

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Kendall Corp.purchased at par value,$75,000 of Shrem Company's 8% bonds that mature in three-years.The bonds pay interest semiannually on June 1 and December 1.Kendall plans to hold the bonds until they mature.When the bonds mature,Kendall should prepare the following journal entry (assume the semiannual interest was separately recorded) :

A) debit Long-Term Investments-HTM,$75,000; credit Cash,$75,000.
B) debit Cash,$6,000; credit,Unrealized Gain-Equity,$6,000.
C) debit Cash,$75,000; credit Debt Investments-HTM,$75,000.
D) debit Unrealized Gain-Equity,$6,000; credit Cash,$6,000.
E) debit Cash,$75,000; credit Long-Term Investments-Trading,$75,000.

F) A) and E)
G) A) and B)

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Question 63

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

What is comprehensive income and how is it usually reported in the financial statements?

Define the return on total assets and explain how it is used to measure a company's financial performance.

On February 15,Jewel Company buys bonds of Marcelo Corp.for $200,000.The investment is classified as available-for-sale securities.This is the company's first and only investment in available-for-sale securities.On December 31,the bonds had a fair value of $200,300.The entry to record the year-end adjustment is:

On March 15,Alan Company purchased 10% of Cameo Corp.'s stock for $35,000.This is the company's first and only stock investment.On Alan's June 30 year-end,the stock had a fair value of $34,000.Alan should do which of the following:

All of the following statements relating to accounting for international operations are true except:

A company received dividends of $0.35 per share on 300 shares of stock it holds as a stock investment with insignificant influence.The journal entry to record this transaction would be to debit Cash for $105 and credit Dividend Revenue for $105.

Marjam Company owns 41,000 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 the cash dividend received from MacKenzie would include a:

On February 15,Jewel Company buys 7,000 shares of Marcelo Corp.at $28.53 per share.The stock is classified as a stock investment with insignificant influence.This is the company's first and only stock investment.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. -The fair value of the remaining shares is $29.50 per share.The impact on Jewel's net income as a result of its investment in Marcelo Corp.was a(n) :

Investments in equity securities where the investor has a significant,but not controlling influence,are accounted for using the ________ method.

A company should report its portfolio of trading debt securities at its fair value.

Discuss the reasons companies make investments.

Long-term investments in debt securities not classified as trading or held-to-maturity securities are classified as available-for-sale securities.

Landmark buys $300,000 of SRW Company's 8%,5-year bonds payable,at par value on July 1.Interest payments are made semiannually on December 31 and June 30.The journal entry Landmark should make to record interest earned at year-end December 31 is:

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

J.P.Industries purchased Yang's notes for $143,375 as a long-term investment.The investment is classified as available-for-sale.J.P.'s entry to record the purchase transaction would include a:

When a U.S.company makes a credit sale to an international customer and the sale terms are for payment in a foreign currency,the foreign exchange rate used to record the sale is the exchange rate:

FreshFoods,Inc.sells American gourmet foods to merchandisers in Singapore.Prepare the journal entries for FreshFoods,to record the following transactions.Include any year-end adjustments.