Exam 12: Investments: Debt and Equity Securities

The equity method is used to account for an investment of more than 20% of another company's

Unless there is compelling evidence to the contrary, significant influence is presumed when a company owns

In 2012, Rune had the following activities in long-term investments: What should be the balance in the Investment in Equity Method Securities-Arledge Stock account as of December 31, 2012?

Rentz Company held a bond investment with a face value of $230,400. The company decided to sell the bonds on April 15, 2012, at a quoted price of 104.5. On that date the carrying value of the bonds was $231,520. The sale is subject to a brokerage commission of $1,152. Prepare the journal entry on April 15, 2012, for the sale of the bond investment. (Ignore accrued interest.)

Bart Corporation purchased 1,200 of the 3,000 outstanding shares of Starr Company common stock for $50 per share. Given this information, when Bart Corporation receives a cash dividend from Starr Company, which of the following accounts should be credited?

Cleveland purchased $100,000 of Rob Company's 10-year, 9 percent bonds for $83,050 on July 1, 2012. Cleveland purchased the bonds to yield 12 percent interest. If Cleveland uses the effective-interest method to amortize discounts, how much interest revenue should Cleveland recognize for 2012 as a result of the investment?

Which of the following is NOT one of the acceptable classifications for investments?

Augsburg Corporation recorded the following transactions for its short-term investments during 2012: Given this information, the adjusting entry that Augsburg needs to make on December 31 is

When an investor uses the equity method to account for investments in common stock, cash dividends received by the investor from the investee should be recorded as

Stanger Company owns 85% of the outstanding stock of Willden Company. At the end of the year, Willden Company reported revenues of $2,500 and expenses of $1,800. How much will Stanger Company report on its own financial statements as income from Willden Company?

The most common type of debt security is

In July 2011, Leaf Company acquired 5,000 shares of the common stock of Ryan Corporation and classified the shares as trading securities. The following January, Ryan announced net income of $100,000 for 2011 and declared a cash dividend of $0.50 per share on its 100,000 shares of outstanding common stock. The Leaf Company dividend revenue from Ryan Corporation in January 2012 would be

Unrealized losses on trading securities are

Mel Company purchased $60,000 of Gibson Company's 20-year, 8 percent bonds at 98 on July 1, 2012. The bonds pay interest each January 1 and July 1, and they mature on July 1, 2029. Given this information, the entry to record the purchase of Gibson Company bonds would include a

On January 1, 2011, the Nevada Company purchased $800,000 of Utah Company's 10 percent, 20-year bonds at 104 and classified the investment as held-to-maturity securities. The bonds pay interest on January 1 and July 1 of each year. Nevada uses straight-line amortization for all premiums and discounts. The entry for the receipt of the semiannual interest on July 1, 2011, is

Mel Company purchased $60,000 of Gibson Company's 20-year, 8 percent bonds at 98 on July 1, 2012. The bonds pay interest each January 1 and July 1, and they mature on July 1, 2029. Given this information, the entry needed on December 31, 2012 (year-end), to account for the interest on Gibson Company's bonds would include a debit to

On April 1, 2012, Fiedler purchased $10,000 of Hun Corporation Bonds at 96 plus accrued interest. The bonds pay interest of 10 percent semiannually on March 1 and September 1. To record this acquisition, Fiedler should debit Investments in Held-to-Maturity Securities - Hun's Bonds for

Stanger Company owns 85% of the outstanding stock of Willden Company. At the end of the year, Willden Company reported revenues of $2,500 and expenses of $1,800. How much minority interest will be reported on Stanger Company's financial statements?

Don Ono purchased Yoko bonds with a face value of $30,000 in the secondary market on March 1, 2012, at a price of $28,340 plus a brokerage fee of $280 and accrued interest. Interest at 10 percent is payable on January 1 and July 1 each year. The bonds were originally issued on January 1, 2011, and mature on January 1, 2014. Don plans to amortize the discount once a year at December 31 on a straight-line basis.

Which of the following is NOT one of the issues associated with accounting for securities?