Exam 15: Investments

Minority interest may be found in the asset section of a consolidated balance sheet.

Available-for-sale securities may only be classified as short-term investments.

Blau Corporation invests $302,500 in Hills Corporation,buying 80 percent of the voting stock.Hills pays Blau $20,000 in cash dividends and earns a net income of $130,000 during 2013.On the consolidated balance sheet,the balance in the investments account representing Blau's interest in Hills will be

Which of the following categories of investments can be both debt and equity securities?

Ming Company purchased 100 percent of Savran Company for $94,000.Of the excess of cost over book value,$15,000 was attributed to Savran's undervalued plant and equipment.The rest was attributed to the general strength of the company.Complete the following work sheet by providing the figures for the Eliminations columns and the Consolidated Balance Sheet column.

Orlov Corporation purchased 8,000 shares of Matsey Corporation common stock for $40 per share on January 1,2012.Matsey reported net income of $110,000 for 2012 and paid dividends of $45,000 during 2012.As of December 31,2012,the market value of Matsey Corporation common stock was $40 per share.Assuming the shares owned by Orlov represent 30 percent of the total outstanding stock of Matsey,the entry to record the recognition of income by Orlov Corporation is:

Write the term that matches each description below. A.Ownership of more than 50 percent of another company's voting stock B.Debt and equity investments that may or may not be held short- or long-term C.Debt investments that will be kept for the long run D.Ownership of less than 20 percent of another company's voting stock E.Illegally using unreleased company knowledge for personal gain F.Ownership of 20 to 50 percent of another company's voting stock G.Debt and equity investments that will be sold shortly after purchase H.Another term for short-term investments

Use this information to answer the following question.These facts concern the long-term stock investments of Webster Corporation: June 1, 2012 Pand cash for the followng long-term investments: 5,000 shares Wayne Corporation common stock (representing 5 percent of outstanding stock) at \ 40 per share; 3,000 shares Upshur Corporation common stock (representing percent of outstanding stock) at \ 24 per share. Dec. 31,2012 Quoted market prices at year end: Wayne common stock, \ 35 ; Upshur common stock, \ 27. April 1, 2013 A change in policy required the sale of 1,000 shares of Wayne Corporation common stock at \ 38. July 1, 2013 Received a cash dividend from Upshur Corporation equal to \ .30 per share. Dec. 31, 2013 Quoted market prices at year end: Wayne common stock, \ 39 ; Ushur common stock \ 22. The entry to record the purchase of the Wayne Corporation common stock is:

The account Allowance to Adjust Short-Term Investments to Market appears as a contra account on the income statement.

Unrealized gains and losses on trading securities appear on the balance sheet.

If a parent company pays more than book value for a 100 percent owned subsidiary,goodwill could arise on the consolidated financial statements.

Held-to-maturity securities are always debt securities,and never equity securities.

Mucura Enterprises has a credit balance of $40,000 in its Allowance to Adjust Long-Term Investments to Market account before adjustment.Its investment portfolio has a total cost of $250,000 and a market value of $225,000.The year-end adjustment entry that would be recorded in the books of Mucura Enterprises is:

Barker Company purchased 100 percent of Coll Company for $130,000.The balance sheets for the two companies are provided below.Complete the work sheet by providing the figures for the Eliminations columns and the Consolidated Balance Sheet column.

As long as an investment can be sold within a short period of time,it must be classified as a current asset.

Long-term bond investments that are classified as available-for-sale must be valued on the balance sheet at cost.

Consolidated financial statements are useful because

Short-term available-for-sale securities are valued on the balance sheet at

Held-to-maturity securities that will mature within one year are classified on the balance sheet as long-term investments and are valued at cost adjusted for the effects of interest.

Held-to-maturity securities are valued on the balance sheet at