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Exam 15: Investments

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Question 41

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Canberry Corporation had net income of $80,000, beginning total assets of $640,000 and ending total assets of $580,000. Its return on total assets is:

A) 13.8%
B) 12.5%
C) 13.1%
D) 725%
E) 800%

F) A) and E)
G) A) and D)

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Question 42

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Strickland Corporation has invested in 10% of the outstanding stock of Nez Corporation. Strickland intends to actively manage this investment for profit. This investment is classified as:

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

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

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Question 43

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Define the foreign exchange rate between two currencies. Explain its effect on business transactions conducted in a foreign currency.

A company had a profit margin of 10.5% and total asset turnover of 1.84. Its return on total assets was:

A decrease in the fair value of a security that has not yet been realized through an actual sale of the security is called a(n) :

Accounting for long-term investments in equity securities with controlling influence uses the:

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

On February 15, Jewel Company buys 7,000 shares of Marcelo Corp. common stock at $28.53 per share plus a brokerage fee of $400. The stock is classified as available-for-sale securities. This is the company's first and only investment in 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 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) :

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. When the bonds mature, the journal entry to record the proceeds will be:

J.P. Industries purchased 2,000 shares of Yang's common stock for $143,000 as a long-term investment. The investment is classified as available-for-sale securities. The par value of the stock was $1 per share. J.P. paid $375 in commissions on the transaction. J.P.'s entry to record the purchase transaction would include a:

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

If a U.S. Company's credit sale to an international customer allows payment to be made in a foreign currency, the same exchange rate must be used for the date of sale and the cash payment date.

A company had net income of $350,000 in Year 1 and $520,000 in Year 2. The company had average total assets of $2,500,000 in Year 1 and $3,000,000 in Year 2. Calculate the return on total assets for Year 1 and Year 2. Comment on the results, did the company's performance improve?

When the cost of a short-term held-to-maturity debt security is different from the maturity value, the difference is amortized over the remaining life of the security.

Mire Corporation had the following transactions involving investments in trading securities during the year. Prior to these transactions, Mire had never had any investments in trading securities. Prepare the required general journal entries to record these transactions. Feb. 16 Purchased 800 shares of HM Corporation stock at $28 per share plus a $400 brokerage fee. Feb. 26 Purchased 500 shares of Sugarland Co. stock at $19 per share plus a $300 brokerage fee. Mar. 2 Received a $0.95 per share dividend from the HM Corporation. Mar. 28 Sold 200 shares of HM Corporation stock for $31 per share less a $150 brokerage fee. Apr. 20 Sold 150 shares of Sugarland Co. stock at $17 per share less a $100 brokerage fee. Apr. 30 The company is preparing quarterly financial statements; prepare an adjusting entry for the fair value adjustment on the trading securities. At April 30, the HM stock has a fair value of $30 per share, and the Sugarland stock has a fair value of $16 per share.

All of the following are true about debt securities except:

Foreign exchange rates fluctuate due to changing ________ and ________ conditions.

Security prices are sometimes listed in fractions. For example, a debt security with a price of 22¾ is the same as $22.25.

The controlling investor is called the:

A company paid $37,800 plus a broker's fee of $525 to acquire 8% bonds with a $40,000 maturity value as a long-term investment. The company intends to hold the bonds to maturity. The correct entry to record the purchase of the bond investment is: