Exam 18: Investing Assets

Sheehan & Co.purchased 35% of the outstanding shares of Jules & Associates.Jules then declared dividends at year end.How will these dividends effect the investment account for Sheehan?

Jardon Jewelers purchased 3,000,000 of the outstanding 10,000,000 shares of Angel & Associates.Jardon has significant influence over Angel,so Jardon will account for this investment using the equity method.Angel declared Net Income of $1,250,000 for the year.How will Angel's Net Income be recorded by Jardon?

For securities classified as trading,companies disclose the maturity value of those securities in the notes to its financial statements.

Where are changes in fair value for trading securities reported?

Glover buys and sells securities and typically classifies them as available for sale.On December 15,Glover purchased $700,000 of Mooney Corporation shares and elected the fair value option to account for the investment.As of December 31,the shares in Mooney Corporation had a fair value of $675,000.In its December 31 financial statements,Glover will report pretax ________.

Under the equity method,cash dividends received by the investor from the investee should be treated as ________.

Quantitative disclosures for investing assets include the nature and extent of risks arising from financial assets.

Can impairment losses recorded on investment assets be reversed at a later date?

Companies report equity investments without a readily determinable fair value at their historical cost.

Trader Trust accepts a $500,000 non-interest bearing 10-year note from Coffee Co.in exchange for Cash on 1/1/16.Coffee Co.promises to repay $500,000 at maturity.The market rate on 1/1/16 was 4%.Complete the entire amortization table for this note,then record journal entries for 2016 (assuming Trader is a calendar-year company).

Packer Publications purchased 40,000 of the outstanding 100,000 shares of Bear Homes.How should Packer account for this investment?

Companies determine the cost of held-to-maturity securities as the present value of the future cash flows,discounted at the market rate of interest.

Refer to Black Corporation: Assume that these securities are available-for-sale.How will these securities be classified on the balance sheet at December 31 of the current year?

PM Distributors began Year 2 with Trading Equity Investments of $8,500 (which consisted of a single investment)as well as a debit balance of $1,000 in the Fair Value Adjustment - Trading Equity Investments account.This trading security was sold for $9,500 during Year 2.How much was the gain or loss for the sale of this investments and how is it recorded?

HdG,Inc.accepts a $100,000,5% note from Aberdeen Unlimited on 4/1/16.,and lends money to Aberdeen.Aberdeen agrees to pay 5 equal annual payments on this note beginning 3/31/17.The market rate at the date of issuance of this note was 5%.How much Interest Revenue will HdG record on 12/31/16,the end of its fiscal year?

Companies classify debt securities in one of two ways: available-for-sale or held-to-maturity.

A separate fair value adjustment account is typically used to reflect the difference between the fair value and the cost of the investment so as to avoid excessive changes in the investment account itself.

A Discount on Notes Receivable results from a stated rate of interest that is lower than the prevailing market rate of interest.

Bateman Enterprises invested in the bonds of Greater Glouster on January 1,2015.These 10-year,$100,000 bonds pay interest of 3% every June 30 and December 31.The effective rate of interest for similar bonds on January 1 was 4%.What is the semi-annual interest payment received by Bateman for these bonds?

Which of the following would not be disclosed equity securities?