Exam 13: Investments and Long-Term Receivables

Bark Corporation began operations on January 1, 2017. No transactions related to these investments occurred during 2018, and the cost and market values on December 31, 2018, are as follows: In the December 31, 2018 adjusting entry, there will be a

Each of the three categories of investments in debt and equity securities has similar accounting for all of the following transactions except

Exhibit 13-03 On January 1, 2017, Train, Inc. accepted an $80,000, non-interest bearing 3 year note in exchange for equipment it sold to Steam Company. Train originally purchased the equipment for $125,000, and it had a book value of $75,000 on the date of the sale. The note was non-interest-bearing. An assumed 11% interest rate is implicit in the agreement. Actual information for 11%, three periods, follows: -Refer to Exhibit 13-03. What amount would Train show as the balance for Discount on Notes Receivable on December 31, 2018?

Which type of investment in securities must always be classified as a current asset?

At December 31, 2015, Williams had the following portfolio of trading securities: Required: a. Assuming any gain or loss is considered to be temporary, prepare the adjusting entry at December 31, 2015, required under current GAAP. b. Assuming that, in 2016, Williams sold the Nathan Co. stock for $83, prepare the entry to record the sale. c. Assuming that at the end of 2016 the portfolio of trading securities is composed of the following holdings, prepare any necessary entry. d. Assuming that at the end of 2017 the portfolio of trading securities is composed of the following holdings, prepare any necessary entry. e. Assuming that, in 2018, the Jacob Co. bonds were reclassified as held-to-maturity when the market value was $34, prepare any necessary entry.

At December 31, 2017, Isotope Co. held the following investments in stock that are classified as trading securities. All investments were acquired in December 2017. Changes in fair value were considered to be temporary. On March 1, 2018, half of the B Company stock was sold for $650. At December 31, 2018, the following investments in stock were held by Isotope: Changes in fair value again were considered to be temporary. Required: Prepare journal entries for a. December 31, 2017 b. March 1, 2018 c. December 31, 2018

Exhibit 13-1 On January 1, 2017, Oak Corporation paid $900,000 for 87,500 shares of Beech Company's common stock, which represents 35% of Beech's outstanding common stock. Beech reported income of $300,000 and paid a cash dividend of $100,000 during 2017. -Refer to Exhibit 13-1. Oak should report the investment in Beech Company on its December 31, 2017, balance sheet at

The Wise Company acquired a 20% interest in the outstanding common stock of the Smith Company. The Wise Company can exercise significant influence over the operating and financial policies of the Smith Company. The Wise Company should account for its investment in the Smith Company by using the

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

On January 1, 2017, Casey Company acquires a 30% interest in Hill Company by purchasing 6,000 shares of its 20,000 common stock for $16 per share. On January 1, 2017, the net assets of Hill Company were as follows: During 2017, Hill reported net income of $200,000 and paid cash dividends of $80,000. Required: Prepare all journal entries on Casey's books to record the acquisition, dividends, and income from the investment in Hill Company.

On January 3, 2017, Nancy Corporation purchased the following equity securities as an investment: Required: a. Prepare the journal entry to record the acquisition of the stock. b. On June 30, 2017, C Company paid dividends of $3.00 per share. Prepare the journal entry that would be used by Nancy to record the dividend receipt. c. On December 31, 2017, the market values per share were: Prepare any journal entry necessary to record these changes in market value. d. On March 14, 2017, Nancy sold 800 shares of C Company for $18 per share. Prepare the journal entry to record the sale.

In a perfectly matched hedge of fixed-rate debt using an interest rate swap, the effect of a change in fair value of the derivative on the income statement

On January 1, 2017, Trevor bought 6% of Joseph Company's common stock for $20,000. During 2017, Joseph earned $6,000 of net income and distributed $4,400 of dividends. On January 1, 2018, Trevor bought an additional 35% of Joseph Company's common stock. The fair value of the Joseph shares owned by Trevor was $21,000 on December 31, 2017. The acquisition of the additional 35% of Joseph at the beginning of 2018 gave Trevor significant influence. Required: Prepare the appropriate entries for Trevor on January 1, 2018, as a result of the additional acquisition and change in ownership classification.

A derivative may be classified as:

On January 1, 2017, Peach, Inc. purchased 40% of the common stock of Apple Company for $61,000. At the date of acquisition, the following information for Apple Company was available: All of Apple Company's other assets had book values equal to their fair values. In 2017, Apple earned $18,000 of net income and distributed $12,500 of dividends. How much investment income would Peach record in 2017?

Vermont Cheese Company has a $5,000,000, 7% bank loan from National Bank. On January 1, 2017, the bank loan has three years to maturity. Vermont enters into a three-year interest rate swap with Cheese Investments with a $5 million notional. The agreement calls for Vermont to receive a fixed interest rate of 7% and pay a variable rate based on LIBOR at the beginning of the year. Payments are to be made to Cheese Investments for the net amount at each year-end. At the beginning of 2017, the LIBOR rate is 6.75%. The three-year fixed rate at the end of 2017 is 9%. Required: Prepare the journal entries that Vermont Cheese Company would make in 2017 relating to the bank loan and the derivative. Round answers to the nearest dollar)

Chang Company purchased several investments in December 2017. Costs and market values of those investments on December 31, 2017, are presented below: Assuming all of the securities are classified as trading securities, the journal entry required on December 31, 2017, the end of Chang's fiscal year, would include a

When a company values an investment at fair value, what must the company disclose in addition to the fair value measurement?

Unrealized gains and losses on investments in trading securities are reported

On January 1, 2017, Waters Corp. bought $25,000 of Violet Co.'s 9% ten-year bonds for $25,300 to yield 8%. The bonds pay interest annually and are classified as held-to-maturity. Required: Using the effective interest method, journalize the receipt of the interest and amortization at December 31, 2018.