Exam 15: Investments

William, Inc.purchased a $400, 000 life insurance policy on the company president on January 1, 2010.The premium that was paid on January 1 amounted to $11, 600.In the first year, cash surrender value increased by $900 and dividends received by William from the insurance company for the year amounted to $300.What was William's insurance expense for 2010?

Investments in debt and equity securities that are held for current resale by banks and stockbrokerage firms are termed

On January 6, 2010, Miller Company acquired 4, 000 shares (or 10%)of Little Corporation's common stock at $28 per share.The securities are classified as available-for-sale investments.On October 24, 2010, Little declared and paid a cash dividend of $1 per share.On December 31, 2010, the market value of Little's common stock was $32 per share.Little also reported a net income of $200, 000 for 2010.At what value should Miller report the investment in Little's common stock on its December 31, 2010 balance sheet?

On January 1, 2010, Antlers, Inc.bought 800 shares (or 10%)of Buck Company's stock at $80.On February 1, 2010, Buck Company declared a 25% stock dividend.On March 1, 2010, Antlers sold several shares of Buck Company stock for $18, 900, realizing a loss of $300. Required: Show the journal entry to record the sale, and compute the number of shares of Buck Company stock that Antlers, Inc., sold.

The use of the effective interest method to amortize a discount associated with the acquisition of an investment in bonds results in

On January 1, 2010, New Company purchased $200, 000 of ten-year 10% bonds of Old Company for $226, 840.Interest is payable annually.The effective yield on the investment is 8%.What is the balance in New's investment in held-to-maturity bonds account (rounded to the nearest dollar, if necessary)at December 31, 2011?

A realized gain or loss on the sale of an available-for-sale security is determined by comparing

Acquisition of greater than 20% of the outstanding stock of a company normally suggests the use of the

Charlie Company purchased available-for-sale equity investments in 2010 at a cost of $200, 000.Their market values totaled $250, 000 and $230, 000 on December 31, 2010, and December 31, 2011, respectively.The entry required on December 31, 2011, would include a

An interest rate swap in which a company has a fixed rate of interest and pays a variable rate is called a

The Copper Company has a bond investment classified as held to maturity, which has a carrying value of $62, 000 and a fair value of $24, 000.The decline in value is considered as other than temporary.Copper should record the decline as

On December 31, 2010, the England Company held 8%, $200, 000 bonds of Marshall Corporation that were purchased at an amount to yield 7%.The bonds were classified as held to maturity and had a carrying value of $208, 640 on December 31, 2010.Interest on the bonds is paid June 30 and December 31.On July 1, 2011, England decided to reclassify the bonds as available for sale.The market price of the bonds at that date was $204, 000. Required: Prepare the journal entries required on June 30 and July 1 of 2011 to fully account for the bond investment.

Ling Company purchased several investments in December 2010.Costs and market values of those investments on December 31, 2010, are presented below: Cost Market Value XYZ stock \ 200,000 \ 180,000 ABC stock 400,000 420,000 DEF stock 600,000 540,000 Assuming all of the securities are classified as available for sale, the journal entry required on December 31, 2010, the end of Ling's fiscal year, would include a

When transferring investments between categories, unrealized holding gains for securities transferred from trading to available-for-sale must be

The Waco Company acquired an 18% interest in the outstanding common stock of the Springfield Company.The Waco Company can exercise significant influence over the operating and financial policies of the Springfield Company.The Waco Company should account for its investment in the Springfield Company by using the

How is the premium or discount on held-to-maturity bond investments presented on the balance sheet?

Withers Company has available-for-sale debt and equity securities that on December 31, 2010, had a cost of $105, 000 and a market value of $102, 000.The market value rose to $117, 000 by December 31, 2011.What accounting action is required on December 31, 2011?

Which of the following is not a derivative?

Premiums or discounts associated with available-for-sale debt securities are

Dividends that are declared at year-end but not received on investments in securities held for sale or trading should be recognized when