Exam 15: Investments

Briefly explain,what are the consolidated financial statements,and how is the consolidation accomplished?

Only the intercompany transactions resulting in revenues require elimination entries in the preparation of a consolidated income statement.

Which of the following categories of investments are debt,but not equity,securities?

A minority interest represents the holdings of stockholders,other than the parent company,who own more than 50 percent of the voting stock of a subsidiary.

Investments are valued on the balance sheet at the original purchase price,even if the price has changed since the date of purchase.

The cost-adjusted-to-market method of accounting for investments is used when the investment is

Goodwill is the amount by which specific assets of a subsidiary are undervalued.

The Allowance to Adjust Long-Term Investments to Market account is placed in the asset section of the balance sheet.

For available-for-sale equity securities,the Unrealized Loss on Long-Term Investments account should be reported as a(n)

For available-for-sale securities,the Unrealized Loss on Long-Term Investments account appears on the income statement.

Loudoun Company and Nelson Company have separate incomes of $77,000 and $85,000,respectively.They had intercompany purchases and sales of $30,000 and intercompany interest of $3,000.Consolidated net income would be

Define the following classifications of investments: A.Short-term investments B.Long-term investments C.Trading securities D.Available-for-sale securities E.Held-to-maturity securities

When the accounting period ends before U.S.Treasury bills are scheduled to mature,the investor's adjusting entry would include a

When a parent company pays less than book value for an investment in a subsidiary,the excess of book value over the cost of the investment should be used to lower the carrying value of the subsidiary's long-term assets (other than long-term marketable securities)in preparing the consolidated financial statements.

An influential but noncontrolling investment is defined as ownership of more than 50 percent of the stock of another company.

In preparing consolidated financial statements,intercompany receivables and payables are never eliminated because they represent amounts due to or receivable from parties outside the consolidated entity.

On January 1,Chapin Corporation purchased,as long-term investments,10 percent of the voting stock of Paxton Corporation for $75,000 and 25 percent of the voting stock of Colb Corporation for $150,000.During the year,Paxton Corporation had earnings of $40,000 and paid dividends of $15,000 on October 15,and Colb Corporation had earnings of $20,000 and paid dividends of $12,000 on November 10.The market value of neither investment declined nor rose during the year.Prepare journal entries without explanations to record this information as appropriate in Chapin Corporation's general journal.

When the cost-adjusted-to-market method is used to account for a long-term investment in stock of another company,the carrying value of the investment is directly affected by

Stafford Company owns 100 percent of the stock of Tazewell Company.The separate income statements for the two companies for the year ended December 31,2013,are as follows: Stafford Company sold merchandise to Tazewell Company for $240,000,which in turn was sold by Tazewell Company to its customers.Tazewell Company paid rentals of $36,000 to Stafford Company on a long-term lease.Using the partially completed form that follows,prepare a consolidated income statement for the year ended December 31,2013.

Under the equity method of accounting for a stock investment,a proportionate share of the investee's income is recorded on the investor's records.