Exam 13: Finance and Stock Market Equilibrium

Which method of accounting for investments recognizes income when income is earned by the investee?

Any transaction or set of transactions that brings together two or more previously separate entities to form a single accounting entity is called a

____________________ securities, such as bonds, exist when another entity owes the security holder some combination of principal and interest.

Tidewater Management, Inc. had no investments in short-term marketable securities prior to 2013. During 2013, the company engaged in the following investment transactions: 1.Purchased 300 shares of Toucan Taxi Company stock for $14 per share. 2.Received a $2.50 per share dividend on the Toucan Taxi stock. 3.Sold 200 shares of the Toucan Taxi stock for $16 per share. At the end of 2013, the Toucan Taxi stock had a market value of $15 per share. A)Prepare journal entries for each of the three transactions assuming they are available-for-sale securities. B)Prepare journal entries, if required, to recognize the year-end market value. What is the income statement effect of the entry, if any? C)How will this investment be reported on the company's balance sheet at December 31, 2013?

Tom Nelson invested $9,000 into an account yielding 6%. How long must he leave the money in the account to obtain $12,060.90?

If the parent owns 90% of the subsidiary's stock, then 90% of the subsidiary's assets and liabilities are included in the consolidated balance sheet.

What are the effects on the accounting equation from the purchase of a short-term investment?

Manatee Manufacturing sells a piece of equipment to make room for new machinery. Manatee will receive the sales price of $50,000 at the end of 4 years. Assuming interest at a rate of 6% per year, the Present Value of this future cash flow is how much?

Trattoria, Inc. engaged in the following investment transactions during 2013: 1.Purchased 200 shares of Tarbet Corporation stock for $11,500. 2.Received a $1.50 per share dividend on the Tarbet stock. 3.Sold 50 shares of the Tarbet stock for $55 per share. At December 31, 2013, the market value of Tarbet's stock was $54. A)Prepare journal entries to record this investment assuming management intends to hold this investment for less than a month. B)Calculate the market value of the company's investment at December 31, 2013. C)Prepare the necessary journal entry at December 31, 2013. D)How should this investment be disclosed in the December 31, 2013 financial statements?

The initial amount of money borrowed or loaned is also known as the future value of cash flows.

Match the following terms to their correct definition: -Name given to an investor who owns over 50% of the outstanding common stock of the investee

You are the owner of a company that produces an energy drink that has unique properties. Its primary ingredient, a berry found only in the South American rain forest, causes a significant prolonged increase in the drinker's metabolism rate. You have found only a single supplier of this berry, Tropical Supplies, Inc., a publicly traded company. What are some things you can do to assure your company of access to this important raw material?

Chuck is looking to invest $15,000 now so that he can purchase a new car in 4 years. The expected price of the car, after tax, title and registration, is expected to be $18,232.65. What is the interest rate required on Chuck's investment to achieve this amount?

On January 1, 2012, Teddy Bear Company purchased 25% of the common stock of one of its major suppliers-Fluff n' Stuff, for $1,000,000 cash. On November 1, 2012, Fluff n' Stuff declared and paid a cash dividend of $50,000. Further, for the year ended December 31, 2012, Fluff n' Stuff reported net income of $200,000. A) Which method of accounting for investments should be used for the Fluff n' Stuff stock? B) Record all of the necessary journal entries for this investment during 2012. C) What will be the balance in the investment account at December 31, 2012?

If the stated interest rate is 12% per year, but it is compounded semiannually, then the adjusted rate used for present or future value calculations will be

The practice of adjusting the market value of securities that are accounted for using the fair value method is referred to as

The interest rate is the percentage that is multiplied by the future value to yield the amount of interest for that period.

Minority (or noncontrolling) interest is disclosed when the parent owns more than 50%, but less than 100% of the outstanding common stock.

Merlin is saving money to purchase a new car. If he deposits $5,000 into a saving account that pays 8% interest, compounded semi-annually, how much will he have in his account at the end of the first year?