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Exam 15: Investments

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Question 71

Multiple Choice

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Long-term investments are reported in the:

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.

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

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Question 72

True/False

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

A) True
B) False

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Question 73

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

If the exchange rate for Canadian and U.S.dollars is 0.82777 to 1,this implies that 3 Canadian dollars will buy ________ worth of U.S.dollars.

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

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

Explain how to account for held-to-maturity debt securities at and after acquisition and how they are reported in the financial statements.

Pravis Corporation owns 30% of Kuster Corporation.Pravis Corporation received $9,000 in cash dividends from Kuster Corporation.The entry to record receipt of these dividends is:

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

On May 1 of the current year,a company paid $200,000 cash to purchase 6%,10-year bonds with a par value of $200,000; interest is paid semiannually each May 1 and November 1.The company intends to hold these bonds until they mature.Prepare the journal entry to record the receipt of the first semiannual interest payment on November 1.

Long-term investments include investments in land or other assets not used in a company's operations.

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

The two business entities involved in an investment in securities with controlling influence,for which consolidated financial statements are prepared,are known as:

Hubbard Company had the following trading securities in its portfolio at December 31.The Fair Value Adjustment-Trading account had a balance of zero prior to year-end adjustment.Prepare the appropriate adjusting journal entry. $\begin{array} { | l | r | r | } \hline { \text { Short-Term Investments } } & { \text { Cost } } & { \text { FairValue } } \\\hline \text { XBM } & \$ 24,500 & \$ 25,900 \\\hline \text { Micro } & 51,000 & 48,600 \\\hline \text { Outel } & 62,300 & 61,000 \\\hline \text { Dull } & 29,900 & 30,200 \\\hline \text { Totals } & \$ 167,700 & \$ 165,700 \\\hline\end{array}$

Barnes Company purchased $50,000 of 8% bonds at par.The bonds mature in six years and are a held-to-maturity security.Which of the following is the correct journal entry to record the receipt of the semiannual interest payment?

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:

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

Landmark Corp.buys $300,000 of Schroeter Company's 8%,5-year bonds at par value on September 1.Interest payments are made semiannually.All of the following regarding accounting for the securities are true except:

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

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