Exam 14: Investments in Debt and Equity Securities

The only significant difference between the provisions of international accounting standards as promulgated by IAS 39 and U.S. accounting standards under FASB Statement No. 115 is

A debit balance in the account Market Adjustment--Available-for-Sale Securities at the end of a year should be interpreted as the net

When an investor uses the cost method to account for investments in common stock, cash dividends received by the investor from the investee should normally be recorded as

During 2010, Barney Company purchased marketable equity securities as a short-term investment and classified them as trading securities. The cost and market value at December 31, 2010, were as follows: Barney sold 1,000 shares of Company Y stock on March 16, 2011, for $25 per share, incurring $1,200 in brokerage commissions and taxes. On the sale, Barney should report a realized loss of

Which of the following is true regarding the provisions of IAS 39?

Which securities are purchased with the intent of selling them in the near future?

Edwards Company began business in February 2010. During the year, Edwards purchased the three trading securities listed below. On its December 31, 2010, balance sheet, Edwards appropriately reported a $4,000 debit balance in its Market Adjustment--Trading Securities account. There was no change in 2011 in the composition of Edward's portfolio of marketable equity securities held as a temporary investment. Pertinent data are as follows: What amount should Edwards credit to the Market Adjustment--Trading Securities account at December 31, 2011?

On January 1, 2011, Alsop Corp. acquired 30 percent (13,000 shares) of Stone Services Inc. common stock for $1,300,000 as a long-term investment. Data from Stone's 2011 financial statements include the following: The market value of Stone Services Inc. common stock on December 31, 2011, was $98 per share. Alsop does not have any other noncurrent investments in securities. Prepare the necessary journal entries for Alsop's investment in Stone Services Inc. common stock under

Northwick Company acquired 10,000 shares of the common stock of Shaver Corp. in July 2011. The following January, Shaver announced a $100,000 net income for 2011 and declared a cash dividend of $.50 per share on its 100,000 shares of outstanding common stock. The Northwick Company dividend revenue from Shaver Corp. in January 2011 would be

Joseph Co. executed the following long-term investment transactions during the current year. Prepare journal entries with appropriate supporting computations for the year's transactions.

The following transactions of the Snyder Company were completed during the fiscal year just ended: Prepare the entries necessary to record the above transactions.

Martin Co. purchased the following portfolio of trading securities during 2011 and reported the following balances at December 31, 2011. No sales occurred during 2011. All declines are considered to be temporary. The carrying value of the portfolio at December 31, 2011, on Martin Co.'s balance sheet would be

Poster Inc. owns 35 percent of Elliott Corporation. During the calendar year 2011, Elliott had net earnings of $300,000 and paid dividends of $36,000. Poster mistakenly accounted for the investment in Elliott using the cost method rather than the equity method of accounting. What effect would this have on the investment account and net income, respectively?

Marino Corporation purchased the following portfolio of trading securities during 2011 and reported the following balances at December 31, 2011. No sales occurred during 2011. All declines are considered to be temporary. The only transaction in 2012 was the sale of security Z for $34,000 on December 31, 2012. The market values for the other securities at December 31, 2012, were the same as at December 31, 2011. Marino's entry to record the sale of security Z would include a

The following selected information is available from the financial statements of a large global company: Required: Use the financial information above to answer the following questions:

Turner Enterprises purchased 10,000 shares of stock in Twila Corporation for $12 per share. Turner's broker arranged for Turner to pay only $4 cash per share at the date of purchase with the remaining balance to be paid in monthly installments. Turner should record the investment by:

In 2011, KZF Inc. purchased stock as follows: At December 31, 2011, the market values of the securities were as follows: The investments in common stock are classified by KZF Inc. as available-for-sale securities accounted for by the cost method. The fiscal year of KZF ends on December 31.

Martin Co. purchased the following portfolio of available-for-sale securities during 2011 and reported the following balances at December 31, 2011. No sales occurred during 2011. All declines are considered to be temporary. Martin Co. should report what amount related to the securities transactions in its 2011 income statement?

The following information relates to Rowling Company's short-term investment in equity securities available for sale at the end of 2010 and 2011 (in 000s): Rowling's net realized and unrealized gains and losses for 2011, respectively, would be

On January 1, 2011, Capitech Corporation acquired Logirun, Inc. as a long-term investment for $250,000 (a 30 percent common stock interest in Logirun). On that date, Logirun had net assets with a book value and current market value of $800,000. During 2011, Logirun reported net income of $90,000 and declared and paid cash dividends of $20,000. What is the maximum amount of income that Capitech should report from this investment for 2011?