Exam 15: Investments and International Operations

On January 2,Froxel Company purchased 10,000 shares of Sandia Corp.common stock at $19 per share plus a $3,000 commission.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.

Cosmos Corporation had the following long-term investment transactions. Prepare the journal entries Cosmos Corporation should record for these transactions and events.

Kreighton Manufacturing purchased on credit £50,000 worth of production materials from a British company when the exchange rate was $1.97 per British pound.At the year-end balance sheet date the exchange rate increased to $2.76.If the liability is still unpaid at that time,Kreighton must record a:

A company has an investment in 9% bonds with a par value of $100,000 that pay interest on October 1 and April 1.The amount of interest accrued on December 31 (the company's year-end)would be:

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

________________________ refers to all changes in equity for a period except for those due to investments by and distributions to owners.

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:

Profit margin reflects the percent of net income in each dollar of net sales.

Landmark Corp.buys $300,000 of Schroeter Company's 8% five-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:

_________________ are debt securities a company intends and is able to hold until the maturity date.

On June 18,Wyman Company (a U.S.Company)sold merchandise to the Nielsen Company of Denmark for €60,000 (Euros),with a payment due in 60 days.If the exchange rate was $1.35 per euro on the date of sale and $1.14 per euro on the date of payment,Johnson Company should recognize a foreign exchange gain or loss in the amount of:

Consolidated financial statements:

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 bond purchase.

Barzetti had no investments prior to the current year.It had the following transactions involving available-for-sale and held-to-maturity securities during the year.The stock purchases are considered short-term available-for-sale securities.Prepare Barzetti's journal entries to record the transactions and events associated with the investment purchases.

A company paid $600,000 for 10% bonds with a par value of $600,000 on September 1.The bonds pay 5% interest semiannually on September 1 and March 1.The company intends to hold the bonds until they mature.Prepare the journal entries for the following dates and transactions related to this bond acquisition. (1)Bonds purchased on September 1. (2)Year-end adjusting entry,December 31. (3)Receipt of semiannual interest March 1. (4)Redemption of the bonds at maturity on August 31.

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

Equity securities giving an investor significant influence over an investee are always considered short-term investments.

The cost method of accounting is used for long-term investments in equity securities with significant influence.

When using the equity method,receipt of cash dividends increases the carrying (book)value of an investment in equity securities.

Zhang Corp.owns 40% of Magnor Company's common stock.Magnor pays $97,000 in total cash dividends to its shareholders.Zhang's entry to record this transaction should include a: