Exam 16: Investments

On January 14, Blackwell Corporation purchased 20, 11%, $1,000 Eastman Company bonds for $21,000, plus brokerage fees of $400. On November 30, the company sold 10 of the Eastman Company bonds for $11,700, less $300 brokerage fees. Prepare journal entries for the purchase and sale of the Eastman Company bonds.

The Market Adjustment account

Pension funds and mutual funds regularly invest in debt and stock securities to

Which of the following is the correct matching concerning an investor's influence on the operations and financial affairs of an investee?

Rosen Company purchased 35,000 shares of common stock of Corporation as a long-term investment for $700,000. During the year, Polo Corporation reported net income of $300,000 and paid dividends of $100,000. Instructions (a) Assuming that the 35,000 shares represent a 10% interest in Polo Corporation: 1. Prepare the journal entry to record the investment in Polo stock. 2. Prepare any entries that Rosen Company should make in accounting for its investment in Polo stock during the year. 3. What is the balance of the Stock Investments account on Rosen Company's books at the end of the year? (b) Repeat requirement (a) above except assume that the 35,000 shares represent a 20% interest in Polo Corporation.

At the end of its first year, the trading securities portfolio consisted of the following common stocks. The unrealized loss to be recognized under the fair value method is

At December 31, 2010, the trading securities for Carter Company are as follows: Prepare the adjusting entry at December 31, 2010, to report the securities at fair value.

Which of the following is not a true statement regarding short-term debt investments?

Which of the following would not be reported under "Other Revenues and Gains" on the income statement?

Winrow Co. purchased 50, 6% Johnston Company bonds for $50,000 cash plus brokerage fees of $500. Interest is payable semiannually on July 1 and January 1. The entry to record the July 1 semiannual interest payment would include a

On January 5, 2010, Reiley Company purchased the following stock securities as a long-term investment: 300 shares Holle Corporation common stock for $4,200. 500 shares Wood Corporation common stock for $10,000. 800 shares Kiley Corporation common stock for $22,800. Assume that Reiley Company cannot exercise significant influence over the activities of the investee companies and that the cost method is used to account for the investments. On June 30, 2010, Reiley Company received the following cash dividends: On November 15, 2010, Reiley Company sold 200 shares of Kiley Corporation common stock for $7,500. On December 31, 2010, the fair value of the securities held by Reiley Company is as follows: Instructions Prepare the appropriate journal entries that Reiley Company should make on the following dates: January 5, 2010 June 30, 2010 November 15, 2010 December 31, 2010

A company that owns more than 50% of the common stock of another company is known as the ______________ company and _____________ financial statements are usually prepared.

If an investor owns between 20% and 50% of an investee's common stock, it is presumed that the investor has significant influence on the investee.

A company that acquires less than 20% ownership interest in another company should account for the stock investment in that company using

An unrealized loss on available-for-sale securities is

Foley Corporation's trading portfolio at the end of the year is as follows: At the end of the year, Foley Corporation should

In recognizing a decline in the fair value of short-term stock investments, an unrealized loss account is debited because

A company that owns more than 50% of the common stock of another company is known as the

Barr Company acquires 60, 10%, 5 year, $1,000 Community bonds on January 1, 2010 for $61,250. This includes a brokerage commission of $1,250. If Barr sells all of its Community bonds for $62,500 and pays $1,500 in brokerage commissions, what gain or loss is recognized?

One of the reasons a corporation may purchase investments is that it has excess cash.