Exam 13: Investments and Long-Term Receivables

The cash surrender value of the insurance policy on the corporation's president would be presented on the balance sheet as

ABC Company has been purchasing stock of XYZ Company for a few years. ABC has classified the XYZ Company stock as trading. ABC has just purchased an additional 10% of XYZ's stock so it now owns 25% and is the largest shareholder. How does this last purchase affect ABC's accounting for this stock?

With the equity method, the investor recognizes its share of the earnings of the subsidiary when the

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 record as interest income on December 31, 2017?

A marketable security is initially classified as a trading security, an available-for-sale security, or a held-to-maturity debt security. Subsequently, a security can be transferred among categories. Required: Explain the accounting for a related unrealized holding gain or loss when a transfer to another category occurs.

On January 2, 2017, Mark Company acquired, as a held-to-maturity investment, bonds with a face value of $500,000 for $562,300. The bonds carry a stated interest rate of 12% and an effective yield of 10%. Interest is paid on June 30 and December 31, and the bonds mature on December 31, 2026. Required: Prepare the journal entries necessary to record the purchase of the bonds and the first two interest receipts using the straight-line method of amortization.

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 income from the investment in Beech Company for 2017 of

What factors determine significant influence over the financial and operating policies of the investee company?

All of the following statements regarding available-for-sale debt securities are true except

When bonds are purchased between interest dates, the accrued interest should be

On January 1, 2017, Brewster's, Inc. bought $50,000 of 10% ten-year bonds of Chocolate Co. for $56,795 to yield 8% annually. The bonds pay interest semiannually and are classified as held-to-maturity. Interest is paid on June 30 and December 31. Required: Using the effective interest method, journalize the receipt of the interest and amortization at December 31, 2017.

Warren, Inc. purchased a $400,000 life insurance policy on the company president on January 1, 2017. The premium that was paid on January 1 amounted to $11,600. In the first year, cash surrender value increased by $900 and dividends received by Warren from the insurance company for the year amounted to $300. What was Warren's insurance expense for 2017?

Which of the following methods of accounting for investments is appropriate when the investor has significant influence over the investee?

For available-for-sale debt securities purchased at par value, the receipt of interest would be reported as

The carrying value of held-to-maturity debt securities is the

Investments in equity securities include all of the following except

Define the following: *Held-to-Maturity Securities *Trading Securities *Available-for-Sale Securities

In 2017, Bucky Corporation, for the first time, invested some idle funds in a variety of securities classified as trading, as described below: The company's year ends on December 31 and the bonds pay interest semiannually on January 1 and July 1. Required: Answer each of the following questions about Bucky Corporation's investments: a. Calculate the amount of the unrealized holding gain/loss for the securities in the portfolio at the end of the third quarter, and indicate whether the balance would indicate an unrealized gain or an unrealized loss. b. What was the amount of the discount or premium involved in the company's purchase of the bonds? c. Ignoring amortization, how much did Bucky record as Interest Income on the bond investment during the third quarter of 2017?

Which of the following securities are reported at their amortized cost on the balance sheet date?

Wright Company has available-for-sale debt securities that it had originally acquired at part for $110,000. On December 31, 2017, the securities had a market value of $108,000. The market value rose to $123,000 by December 31, 2018. What accounting action is required on December 31, 2018?