Question 1

On January 2,Froxel Company purchased 10,000 shares of Sandia Corp.common stock at $19 per share.This represents 30% of Sandia Corp.'s outstanding stock.On August 6,Sandia Corp.declared and paid cash dividends of $1.75 per share,and on December 31 it reported net income of $150,000.Prepare the necessary entries for Froxel to account for these transactions and events.

Accepted Answer

The answer of On January 2,Froxel Company purchased 10,000 shares...

Question 2

Six months ago,a company purchased stock investments with insignificant influence for $70,000.This is the company's first and only purchase of stock.The current year-end fair value of the stock is $68,500.The company should record a:

Accepted Answer

A)  Debit to Unrealized Loss-Income for $1,500.
B)  Debit to Unrealized Gain-Equity for $1,500.
C)  Debit to Investment Revenue for $1,500.
D)  Credit to Dividend Revenue for $1,500.
E)  Credit to Investment Revenue for $1,500.

Question 3

Lessington Corporation purchases 4,000 shares of Gonzalez Company common stock for $150,000 cash.Gonzalez has 500,000 shares of stock currently outstanding.Lessington's entry to record the purchase would include a:

Accepted Answer

A)  Debit to Stock Investments for $150,000.
B)  Credit to Common Stock for $150,000.
C)  Credit Equity Method Investment $150,000.
D)  Debit to Long-Term Investments-AFS for $150,000.
E)  Debit to Equity Method Investment for $150,000.

Question 4

On January 1,Year 1,Rickson Corporation purchased 7,500 shares of AutoTech as an equity method investment for a total of $235,000.The 7,500 shares represent 30% of the outstanding (25,000)shares of AutoTech.Prepare the journal entries for Rickson to record the following transactions and events:

Accepted Answer

The answer of On January 1,Year 1,Rickson Corporation purchased 7,500...

Question 5

Investments can be classified as all but which of the following:

Accepted Answer

A)  Intangible investments.
B)  Held-to-maturity debt securities.
C)  Available-for-sale debt securities.
D)  Stock investments with insignificant influence.
E)  Trading debt securities.

Question 6

What are the accounting basics for equity securities,including classification and accounting method?

Accepted Answer

At acquisition,equity securities are rec...

Question 7

Return on total assets can be separated into the profit margin and total asset turnover.

Accepted Answer

A) True 
 B)False  True

Question 8

Kendall Corp.purchased at par value,$160,000 of Barker Company's 7% bonds that mature in 10 months.The bonds pay interest semiannually on June 1 and December 1.Kendall plans to hold the bonds until they mature.The journal entry to record Kendall's purchase of the bonds is:

Accepted Answer

A)  debit Debt Investments-HTM $160,000; credit Cash,$160,000.
B)  debit Cash,$169,333; credit,Short-Term Investments-HTM $169,333.
C)  debit Cash,$160,000; credit Short-Term Investments-HTM $160,000.
D)  debit Long-Term Investments-HTM $160,000; credit Cash $160,000.
E)  debit Cash,$160,000; credit Long-Term Investments-HTM $160,000.

Question 9

On November 12,Higgins,Inc.,a U.S.Company,sold merchandise on credit to Kagome of Japan at a price of 1,500,000 yen.The exchange rate was $0.00837 per yen on the date of sale.On December 31,when Higgins prepared its financial statements,the exchange rate was $0.00843.Kagome paid in full on January 12,when the exchange rate was $0.00861.On December 31,Higgins should prepare the following journal entry:

Accepted Answer

A)  Debit Sales $90; credit Foreign Exchange Gain $90.
B)  Debit Foreign Exchange Loss $90; credit Sales $90.
C)  Debit Accounts Receivable-Kagome $90; credit Foreign Exchange Gain $90.
D)  Debit Foreign Exchange Loss $90; Accounts Receivable-Kagome $90.
E)  No journal entry is required until the amount is collected.

Question 10

Available-for-sale securities are reported at fair value on the balance sheet.

Accepted Answer

A) True 
 B)False

Question 11

Landmark Corp.buys $300,000 of Schroeter Company's 8%,5-year bonds payable,at par value on September 1.Interest payments are made semiannually.Landmark plans to hold the bonds for the 5-year life.The journal entry to record the purchase should include:

Accepted Answer

A)  A debit to Debt Investments-AFS $300,000.
B)  A debit to Debt Investments-Trading $300,000.
C)  A debit to Debt Investments-HTM $300,000.
D)  A debit to Stock Investments-HTM $300,000.
E)  A debit to Cash $300,000.

Question 12

Long-term investments include:

Accepted Answer

A)  Investments that are not readily convertible to cash or not intended to be converted to cash in the short term.
B)  Investments in marketable stocks that are intended to be converted into cash in the short-term.
C)  Investments in marketable bonds that are intended to be converted into cash in the short-term.
D)  Only investments readily convertible to cash.
E)  Investments intended to be converted to cash within one year. A

Question 13

Strickland Corporation has invested in debt securities.Strickland intends to actively buy and sell this investment for profit.This investment is classified as:

Accepted Answer

A)  an available-for-sale security.
B)  a held-to-maturity security.
C)  a trading security.
D)  a significant influence security.
E)  a controlling influence security.

Question 14

Maroon Company sold supplies in the amount of €15,000 (euros)to a French company when the exchange rate was $1.15 per euro.At the time of payment,the exchange rate decreased to $1.12.Maroon must record a loss of $450.

Accepted Answer

A) True 
 B)False

Question 15

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

Accepted Answer

consolidat...

Question 16

If a U.S.company makes a credit sale to a foreign company,the sales price must be translated into dollars as of the date of ________.

Accepted Answer

The answer of If a U.S.company makes a credit sale...

Question 17

Arkansana Inc.imports inventory from Costa Rica.Prepare the journal entries for Arkansana to record the following transactions.Include any year-end adjustments.

Accepted Answer

The answer of Arkansana Inc.imports inventory from Costa Rica.Prepare the...

Question 18

All of the following statements regarding accounting for equity investments with controlling influence are true except:

Accepted Answer

A)  These investments are accounted for using fair values with unrealized gains and losses reported in other comprehensive income.
B)  The parent uses the consolidation method.
C)  The controlling investor is called the parent.
D)  Consolidated financial statements show the financial statements of all entities under the parent's control,including all subsidiaries.
E)  An investor who owns more than 50% of a company's voting stock has control over the investee.

Question 19

A company has net income of $130,500.Its net sales were $1,740,000 and its average total assets were $2,750,000.Its profit margin equals 7.5%.

Accepted Answer

A) True 
 B)False  True

Question 20

A U.S.company makes a sale to a foreign customer receivable in 30 days in the customer's currency.The sale would be recorded by the U.S.company on the date:

Accepted Answer

A)  Of sale using a projected estimate of the U.S.dollar value at payment date.
B)  Of sale using a 30-day average U.S.dollar value.
C)  Of sale using the current dollar value.
D)  Of sale using the foreign currency value.
E)  When payment is received.

Exam 26: Investments

Correct Answer
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Six months ago,a company purchased stock investments with insignificant influence for $70,000.This is the company's first and only purchase of stock.The current year-end fair value of the stock is $68,500.The company should record a:

Correct Answer
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Lessington Corporation purchases 4,000 shares of Gonzalez Company common stock for $150,000 cash.Gonzalez has 500,000 shares of stock currently outstanding.Lessington's entry to record the purchase would include a:

Correct Answer
verified

On January 1,Year 1,Rickson Corporation purchased 7,500 shares of AutoTech as an equity method investment for a total of $235,000.The 7,500 shares represent 30% of the outstanding (25,000)shares of AutoTech.Prepare the journal entries for Rickson to record the following transactions and events:

Correct Answer
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Investments can be classified as all but which of the following:

Correct Answer
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What are the accounting basics for equity securities,including classification and accounting method?

Correct Answer
verified
At acquisition,equity securities are rec...
View Answer

Return on total assets can be separated into the profit margin and total asset turnover.

Correct Answer
verified
True

Kendall Corp.purchased at par value,$160,000 of Barker Company's 7% bonds that mature in 10 months.The bonds pay interest semiannually on June 1 and December 1.Kendall plans to hold the bonds until they mature.The journal entry to record Kendall's purchase of the bonds is:

Correct Answer
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Correct Answer
verified

Available-for-sale securities are reported at fair value on the balance sheet.

Correct Answer
verified

Landmark Corp.buys $300,000 of Schroeter Company's 8%,5-year bonds payable,at par value on September 1.Interest payments are made semiannually.Landmark plans to hold the bonds for the 5-year life.The journal entry to record the purchase should include:

Correct Answer
verified

Long-term investments include:

Correct Answer
verified
A

Strickland Corporation has invested in debt securities.Strickland intends to actively buy and sell this investment for profit.This investment is classified as:

Correct Answer
verified

Maroon Company sold supplies in the amount of €15,000 (euros)to a French company when the exchange rate was $1.15 per euro.At the time of payment,the exchange rate decreased to $1.12.Maroon must record a loss of $450.

Correct Answer
verified

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

Correct Answer
verified
consolidat...
View Answer

If a U.S.company makes a credit sale to a foreign company,the sales price must be translated into dollars as of the date of ________.

Correct Answer
verified

Arkansana Inc.imports inventory from Costa Rica.Prepare the journal entries for Arkansana to record the following transactions.Include any year-end adjustments.

Correct Answer
verified

All of the following statements regarding accounting for equity investments with controlling influence are true except:

Correct Answer
verified

A company has net income of $130,500.Its net sales were $1,740,000 and its average total assets were $2,750,000.Its profit margin equals 7.5%.

Correct Answer
verified
True

A U.S.company makes a sale to a foreign customer receivable in 30 days in the customer's currency.The sale would be recorded by the U.S.company on the date:

Correct Answer
verified

Exam 26: Investments

Correct AnswerverifiedShow Answer

Six months ago,a company purchased stock investments with insignificant influence for $70,000.This is the company's first and only purchase of stock.The current year-end fair value of the stock is $68,500.The company should record a:

Correct AnswerverifiedShow Answer

Lessington Corporation purchases 4,000 shares of Gonzalez Company common stock for $150,000 cash.Gonzalez has 500,000 shares of stock currently outstanding.Lessington's entry to record the purchase would include a:

Correct AnswerverifiedShow Answer

On January 1,Year 1,Rickson Corporation purchased 7,500 shares of AutoTech as an equity method investment for a total of $235,000.The 7,500 shares represent 30% of the outstanding (25,000)shares of AutoTech.Prepare the journal entries for Rickson to record the following transactions and events:

Correct AnswerverifiedShow Answer

Investments can be classified as all but which of the following:

Correct AnswerverifiedShow Answer

What are the accounting basics for equity securities,including classification and accounting method?

Correct AnswerverifiedAt acquisition,equity securities are rec...View AnswerShow Answer

Return on total assets can be separated into the profit margin and total asset turnover.

Correct AnswerverifiedTrue

Kendall Corp.purchased at par value,$160,000 of Barker Company's 7% bonds that mature in 10 months.The bonds pay interest semiannually on June 1 and December 1.Kendall plans to hold the bonds until they mature.The journal entry to record Kendall's purchase of the bonds is:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Available-for-sale securities are reported at fair value on the balance sheet.

Correct AnswerverifiedShow Answer

Landmark Corp.buys $300,000 of Schroeter Company's 8%,5-year bonds payable,at par value on September 1.Interest payments are made semiannually.Landmark plans to hold the bonds for the 5-year life.The journal entry to record the purchase should include:

Correct AnswerverifiedShow Answer

Long-term investments include:

Correct AnswerverifiedA

Strickland Corporation has invested in debt securities.Strickland intends to actively buy and sell this investment for profit.This investment is classified as:

Correct AnswerverifiedShow Answer

Maroon Company sold supplies in the amount of €15,000 (euros)to a French company when the exchange rate was $1.15 per euro.At the time of payment,the exchange rate decreased to $1.12.Maroon must record a loss of $450.

Correct AnswerverifiedShow Answer

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

Correct Answerverifiedconsolidat...View AnswerShow Answer

If a U.S.company makes a credit sale to a foreign company,the sales price must be translated into dollars as of the date of ________.

Correct AnswerverifiedShow Answer

Arkansana Inc.imports inventory from Costa Rica.Prepare the journal entries for Arkansana to record the following transactions.Include any year-end adjustments.

Correct AnswerverifiedShow Answer

All of the following statements regarding accounting for equity investments with controlling influence are true except:

Correct AnswerverifiedShow Answer

A company has net income of $130,500.Its net sales were $1,740,000 and its average total assets were $2,750,000.Its profit margin equals 7.5%.

Correct AnswerverifiedTrue

A U.S.company makes a sale to a foreign customer receivable in 30 days in the customer's currency.The sale would be recorded by the U.S.company on the date:

Correct AnswerverifiedShow Answer

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Correct Answer
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Correct Answer
verified
At acquisition,equity securities are rec...
View Answer

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True

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Correct Answer
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Correct Answer
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A

Correct Answer
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consolidat...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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True

Correct Answer
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