Exam 15: Investments and International Operations

Detalo Co.held bonds of Schooner Corp.with a cost of $125,000 and a market value of $127,000.Detalo also held 1,500 shares of Tranco common stock with a cost of $25,000 and a market value of $24,700.These are classified as long-term available-for-sale securities.Prepare the journal entry to record the market value of the investments as of December 31.

A company reported net sales of $900,000,net income of $100,000 and average total assets of $425,000.Calculate its return on total assets.

A company has net income of $250,000,net sales of $2,000,000,and average total assets of $1,500,000.Its return on total assets equals:

Wiffery Company had the following trading securities in its portfolio at December 31.The Fair Value Adjustment - Trading account had a balance of zero prior to year-end adjustment.Prepare the appropriate adjusting journal entry.

Brown Company sold supplies in the amount of 15,000 euros to a French company when the exchange rate was $1.15 per euro.At the time of payment,the exchange rate decreased to $1.12.Brown must record a loss of $450.

___________________________ are investments in securities that management intends to convert to cash within the longer of one year or the operating cycle,and are readily convertible to cash.

Available-for-sale debt securities are:

Trading securities are securities that are purchased by trading other securities rather than by paying cash.

NSC Corporation has invested in 10% of the outstanding stock of VC Corporation.NSC intends to actively manage this investment for profit.This investment is classified as:

Discuss the reasons companies make investments.

On February 15,Seacroft buys 7,000 shares of Kebo common stock at $28.53 per share plus a brokerage fee of $400.The stock is classified as available-for-sale securities.On March 15,Kebo declares a dividend of $1.15 per share payable to stockholders of record on April 15.Seacroft received the dividend on April 15 and ultimately sells half of the Kebo stock on November 17 of the current year for $29.30 per share less a brokerage fee of $250.The journal entry to record the purchase on February 15 is:

Cash equivalents are investments that are readily converted to known amounts of cash and mature within three months.

Explain how held-to-maturity debt securities are accounted for at and after acquisition and how they are reported in the financial statements.

Investments in trading securities are always classified as ______________ and are reported as _______________ on the balance sheet.

Micron owns 35% of Martok.Martok pays a total of $47,000 in cash dividends for the period.Micron's entry to record the dividend transaction would include a:

Griggs Company holds $50,000 of 8% bonds as a held-to-maturity security.Which of the following is the correct journal entry to record the receipt of the semiannual interest payment?

Management's intent determines whether an available-for-sale security is classified as long-term or short-term.

Acadia had no investments prior to the current year.It had the following transactions involving available-for-sale and held-to-maturity securities during the year.The stock purchases are considered short-term available-for-sale securities.Prepare journal entries to record the transactions and events associated with the investment purchases.

Multinational corporations can be U.S.companies with operations in other countries.

If a long-term investment in an equity security gives the investor significant influence over the investee,the investment is classified as available-for-sale.