Exam 15: Investments and International Operations

On January 1,2014,Rickson Corporation purchased 7,500 shares of AutoTech as a long-term 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:

Financial statements that show the financial position,results of operations,and cash flows of all entities under the parent company's control,including all subsidiaries are known as:

Profit margin is net sales divided by net income.

A company holds $40,000 of 7% bonds as a held-to-maturity security.The journal entry to record receipt of a semiannual interest payment includes a debit to Cash for $2,800 and a credit to Interest Revenue for $2,800. $40,000 * 7% * ½ year = $1,400

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

All of the following statements regarding equity securities are true except:

Unrealized gains and losses on trading securities are reported on the income statement.

Long-term investments can not include:

Management's intent determines whether an available-for-sale security is classified as long-term or short-term.

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.

Trading securities are always reported as current assets.

On February 15,Jewel Company buys 7,000 shares of Marcelo Corp.common at $28.53 per share plus a brokerage fee of $400.The stock is classified as 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 amount that Jewel Company should report in the equity section of its year-end December 31 balance sheet for its investment in Marcelo Corp.is:

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.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 journal entry to record the dividend on April 15 is:

On April 1 of the current year,a company paid $150,000 cash to purchase 7%,10-year bonds with a par value of $150,000;interest is paid semiannually each April 1 and October 1.The company intends to hold these bonds until they mature.Prepare the journal entries to record the bond purchase,the receipt of the first semiannual interest payment on October 1 of the current year,and the accrual of interest for the year-end December 31.

Foreign exchange rates fluctuate due to changes in all but which of the following?

Rainier Importers purchases automotive parts from Austria.Prepare journal entries for the following transactions of Rainier.

__________________________ are investments in securities that are not readily convertible to cash,or are not intended to be converted to cash in the short-term.

Investments in trading securities are always classified as ______________ and are reported as _______________ on the balance sheet. Answers can appear in any order.

Landmark Corp.buys $300,000 of Schroeter Company's 8% five-year bonds payable at par value on September 1.Interest payments are made semiannually.Landmark plans to hold the bonds for the five year life.When the bonds mature,the journal entry to record the proceeds will be:

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.