Exam 13: Investments and Long-Term Receivables

Investments that are typically held for short periods of time and sold by the company in the expectation of a profit on the short-term differences in price are classified as

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

When an investor currently using the fair value method acquires significant influence over the investee at mid-year, the investor should

A note receivable is considered impaired when

On April 1, 2017 the Reba Company purchased 10%, $800,000 bonds of the Trading Up Company at par plus accrued interest. These bonds were classified as an investment in trading securities. The bonds pay interest on June 30 and December 31 each year. The entry by Reba on April 1, 2017, would include a

The transfer of a security between investment categories is accounted for either at fair value at the time of the transfer or at cost, depending upon the type of transfer.

On September 1, 2018, WV, Inc., bought $60,000 of MD Printer's 20-year, 6% bonds dated January 1, 2017, for $56,920 plus accrued interest. The bonds pay interest annually and are classified as held-to-maturity. On September 1, 2028, WV sold one-fourth of these bonds for $15,000 plus accrued interest. No entries relating to the bonds had been made since December 31, 2027. Straight-line amortization was used. Required: Record the sale of these bonds.

Under the equity method, a receipt of cash dividends by the investor would

Realized gains and losses on investments in available-for-sale securities are reported

On July 1, 2017, Jason Company purchased $60,000 of ten-year 6% bonds of Santo, Inc., for $51,850, to be held-to- maturity. Interest is payable semiannually on June 30 and December 31. The effective yield on the investment is 8%. What amount of interest income should Jason record for the six-month period ended December 31, 2017?

On October 1, 2017, the Sun Company acquired 9% bonds of Jack's Company with a face value of $400,000 for $412,000 plus accrued interest. Interest is payable on June 30 and December 31. How would Sun record the initial bond investment to be held-to-maturity?

All of the following statements regarding held-to-maturity debt securities are true except

The journal entry to recognize the impairment of a note receivable includes a

The Unrealized Holding Gain/Loss-Trading Securities account is a temporary account that would be closed to Retained Earnings during the closing process.

Which of the following is not a derivative?

Stuart Corp. purchased 100 shares of Dumb Co. stock for $8 per share and 200 shares of Silly Inc. stock for $12 per share. The Dumb Co. stock and the Silly, Inc. stock is classified as trading. As of December 31, the Dumb Co. stock is selling for $9 per share and the Silly Inc. stock is selling for $13 per share. Stuart had net income of $10,000 before reporting the impact of investment transactions. Required: a. Record the December 31 adjusting entries for investments. b. What is Stuart Corp.'s net income after adjusting for investments? c. What is the appropriate balance sheet presentation for these investments?

Jupiter Bank decides to invest in trading securities in order to take advantage of short term gains. The bank purchased the following securities for the year 2017. Jan. 15, 2017 Purchased 1,000 shares of Corbin Company common stock for $89 per share May 23, 2017 Purchased 1500 shares of Petro Company common stock for $75 per share At the end of 2017 Corbin Company's common stock was trading on the market at $93 per share, and Petro's common stock had a market price of $70 per share. Required: 1.) Prepare journal entries to record the preceding information. 2.) What is the unrealized holding gain or loss and where is it reported on the 2017 financial statements?

On January 1, 2017, Lightner bought 20,000 shares 5% ownership) of Winter Corp. common stock for $360,000. On May 3, 2017, Winter declared and distributed a 50% stock dividend. On September 1, 2017, Lightner sold 2,000 shares of its investment in Winter stock for $21,400. Required: Compute the amount of gain loss) on the sale of this stock.

On January 1, 2017 Chase sold land to Run Company, accepting a 3-year $200,000 non-interest-bearing note due January 1, 2018. The fair value of the land is $146,238. The land was originally purchased for $136,500 on January 1, 2010. An appropriate rate of interest for a note of this caliber is 11%. Required: Prepare all the journal entries in Chase's books for the January 1,2017 through January 1, 2018, in regards to the Run note.

Which of the following regarding trading securities is correct?