Question 1

The equity method with consolidation is used to account for long-term investments in equity securities with controlling influence.

Accepted Answer

A) True 
 B)False

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

If a U.S.company's credit sale to an international customer allows payment to be made in a foreign currency,the sale transaction is recorded using the exchange rate on the date of sale.

Accepted Answer

A) True 
 B)False

Question 4

Silver Era Co.exports Southwestern artwork to Japan.Prepare journal entries for the following transactions.

Accepted Answer

The answer of Silver Era Co.exports Southwestern artwork to Japan.Prepare...

Question 5

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. 
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.

Question 6

An investor purchased $50,000 of 10 year bonds it intends to holdto maturity.The investor's journal entry to record the purchase should include a debit to Long-Term Investments for $50,000 and a credit to Cash for $50,000.

Accepted Answer

A) True 
 B)False

Question 7

The price of one currency stated in terms of another currency is called a(n):

Accepted Answer

A) Foreign exchange rate. 
B) Currency transaction. 
C) Historical exchange rate. 
D) International conversion rate. 
E) Currency rate. 
A) Foreign exchange rate. 
B) Currency transaction. 
C) Historical exchange rate. 
D) International conversion rate. 
E) Currency rate.

Question 8

Bond sinking funds are examples of short-term investments.

Accepted Answer

A) True 
 B)False

Question 9

Held-to-maturity securities are equity securities a company intends and is able to hold until maturity.

Accepted Answer

A) True 
 B)False

Question 10

On January 4,Year 1,Barber Company purchased 5,000 shares of Convell Company for $59,500 plus a broker's fee of $1,000.Convell Company has a total of 25,000 shares of common stock outstanding and it is presumed the Barber Company will have a significant influence over Convell.During each of the next two years,Convell declared and paid cash dividends of $0.85 per share,and its net income was $72,000 and $67,000 for Year 1 and Year 2,respectively.The January 12,Year 3,entry to record Barber's sale of 3,000 shares of Convell Company stock,which represents 60% of Barber's total investment,for $39,000 cash should be:

Accepted Answer

A) Debit Cash $39,000;debit Loss on Sale of Investment $8,200;credit Long-Term Investments $47,280. 
B) Debit Cash $39,000;debit Loss on Sale of Investment $8,880;credit Long-Term Investments $47,880. 
C) Debit Cash $39,000;credit Gain on Sale of Investment $2,700;credit Long-Term Investments $36,300. 
D) Debit Cash $39,000;credit Gain on Sale of Investment $8,750;credit Long-Term Investments $30,250. 
E) Debit Cash $39,000;debit Loss on Sale of Investment $21,500;credit Long-Term Investments $60,500. 
A) Debit Cash $39,000;debit Loss on Sale of Investment $8,200;credit Long-Term Investments $47,280. 
B) Debit Cash $39,000;debit Loss on Sale of Investment $8,880;credit Long-Term Investments $47,880. 
C) Debit Cash $39,000;credit Gain on Sale of Investment $2,700;credit Long-Term Investments $36,300. 
D) Debit Cash $39,000;credit Gain on Sale of Investment $8,750;credit Long-Term Investments $30,250. 
E) Debit Cash $39,000;debit Loss on Sale of Investment $21,500;credit Long-Term Investments $60,500.

Question 11

Madison Corporation purchased 40% of Jay Corporation for $125,000 on January 1.On June 20 of the same year,Jay Corporation declared total cash dividends of $30,000.At year-end,Jay Corporation reported net income of $150,000.The balance in Madison Corporation's Long-Term Investment-Jay Corporation account as of December 31 should be:

Accepted Answer

A) $77,000. 
B) $125,000. 
C) $173,000. 
D) $197,000. 
E) $370,000. 
A) $77,000. 
B) $125,000. 
C) $173,000. 
D) $197,000. 
E) $370,000.

Question 12

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 3,500 shares is $29.50 per share.The amount that Jewel Company should report in the asset section of its year-end December 31 balance sheet for its investment in Marcelo Corp.is:

Accepted Answer

A) $200,110. 
B) $103,250. 
C) $2,245. 
D) $3,195. 
E) $5,440. 
A) $200,110. 
B) $103,250. 
C) $2,245. 
D) $3,195. 
E) $5,440.

Question 13

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.

Accepted Answer

The answer of Mire Corporation had the following transactions involving...

Question 14

If a long-term investment in an equity security gives the investor significant influence over the investee,the investment is classified as available-for-sale.

Accepted Answer

A) True 
 B)False

Question 15

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 Short-Term 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. 
A) debit Short-Term 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 16

A controlling investor is called the parent,and the investee company is called the subsidiary.

Accepted Answer

A) True 
 B)False

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

All of the following are true for Available-for-sale equity securities except:

Accepted Answer

A) Are recorded at cost when acquired. 
B) May earn dividends that are reported in that year's income statement. 
C) May be classified as either short-term or long-term securities. 
D) Are reported at market value on the balance sheet. 
E) Are actively managed like Trading Securities. 
A) Are recorded at cost when acquired. 
B) May earn dividends that are reported in that year's income statement. 
C) May be classified as either short-term or long-term securities. 
D) Are reported at market value on the balance sheet. 
E) Are actively managed like Trading Securities.

Question 19

All of the following statements regarding other comprehensive income are true except:

Accepted Answer

A) Other comprehensive income includes unrealized gains and losses on available-for-sale securities. 
B) Other comprehensive income is not considered when calculating comprehensive income. 
C) Other comprehensive income includes foreign currency adjustments. 
D) Other comprehensive income includes pension adjustments. 
E) Accumulated other comprehensive income is defined as the cumulative impact of other comprehensive income. 
A) Other comprehensive income includes unrealized gains and losses on available-for-sale securities. 
B) Other comprehensive income is not considered when calculating comprehensive income. 
C) Other comprehensive income includes foreign currency adjustments. 
D) Other comprehensive income includes pension adjustments. 
E) Accumulated other comprehensive income is defined as the cumulative impact of other comprehensive income.

Question 20

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 declares a dividend of $1.15 per share payable to stockholders of record on April 15.Jewel received the dividend on April 15 and ultimately sells half of the Marcelo 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 purchase on February 15 is:

Accepted Answer

A) Debit Long-Term Investments-HTM $199,710;credit Cash $199,710. 
B) Debit Long-Term Investments-AFS $199,710;credit Cash $199,710. 
C) Debit Long-Term Investments-Trading $199,710;credit Cash $199,710. 
D) Debit Long-Term Investments-Trading $200,110;credit Cash $200,110. 
E) Debit Long-Term Investments-AFS $200,110;credit Cash $200,110. 
A) Debit Long-Term Investments-HTM $199,710;credit Cash $199,710. 
B) Debit Long-Term Investments-AFS $199,710;credit Cash $199,710. 
C) Debit Long-Term Investments-Trading $199,710;credit Cash $199,710. 
D) Debit Long-Term Investments-Trading $200,110;credit Cash $200,110. 
E) Debit Long-Term Investments-AFS $200,110;credit Cash $200,110.

Exam 15: Investments and International Operations

The equity method with consolidation is used to account for long-term investments in equity securities with controlling influence.

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

If a U.S.company's credit sale to an international customer allows payment to be made in a foreign currency,the sale transaction is recorded using the exchange rate on the date of sale.

Silver Era Co.exports Southwestern artwork to Japan.Prepare journal entries for the following transactions.

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:

An investor purchased $50,000 of 10 year bonds it intends to holdto maturity.The investor's journal entry to record the purchase should include a debit to Long-Term Investments for $50,000 and a credit to Cash for $50,000.

The price of one currency stated in terms of another currency is called a(n):

Bond sinking funds are examples of short-term investments.

Held-to-maturity securities are equity securities a company intends and is able to hold until maturity.

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.

If a long-term investment in an equity security gives the investor significant influence over the investee,the investment is classified as available-for-sale.

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:

A controlling investor is called the parent,and the investee company is called the subsidiary.

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

All of the following are true for Available-for-sale equity securities except:

All of the following statements regarding other comprehensive income are true except:

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories and Cost of Sales

Accounting Information Systems

Cash and Internal Controls

Accounting for Receivables

Plant Assets, Natural Resources, and Intangibles

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Accounting for Corporations

Long-Term Liabilities

Reporting the Statement of Cash Flows

Analysis of Financial Statements

Managerial Accounting Concepts and Principles

Job Order Cost Accounting

Process Cost Accounting

Cost-Volume-Profit Analysis

Master Budgets and Planning

Flexible Budgets and Standard Costs

Performance Measurement and Responsibility Accounting

Capital Budgeting and Managerial Decisions

Appendix B: Time Value of Money

Appendix C: Activity-Based Costing

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