Question 1

Held-to-maturity securities are:

Accepted Answer

A)  Always classified as Short-Term Investments. 
B)  Equity securities where significant influence involved. 
C)  Debt securities that a company intends and is able to hold to maturity. 
D)  Always classified as Long-Term Investments. 
E)  Equity securities that a company intends and is able to hold to maturity. 
A)  Always classified as Short-Term Investments. 
B)  Equity securities where significant influence involved. 
C)  Debt securities that a company intends and is able to hold to maturity. 
D)  Always classified as Long-Term Investments. 
E)  Equity securities that a company intends and is able to hold to maturity.

Question 2

Explain how transactions (both sales and purchases) in a foreign currency are recorded and reported.

Accepted Answer

When a selling company makes a credit sa

Question 3

If the exchange rate for Canadian and U.S. dollars is 0.82777 to 1, this implies that 3 Canadian dollars will buy ________ worth of U.S. dollars.

Accepted Answer

A)  $2.48 
B)  $0.2759 
C)  $0.82777 
D)  $1.00 
E)  $1.82777 
A)  $2.48 
B)  $0.2759 
C)  $0.82777 
D)  $1.00 
E)  $1.82777

Question 4

An investing company that owns ________ of another (investee) company's voting stock (but not more than 50%) is presumed to have a significant influence over the investee.

Accepted Answer

The answer of An investing company that owns ________ of...

Question 5

Investments in trading securities:

Accepted Answer

A)  Are reported as current assets. 
B)  Are long-term investments. 
C)  Are reported at their cost, no matter what their market value. 
D)  Include only debt securities. 
E)  Include only equity securities. 
A)  Are reported as current assets. 
B)  Are long-term investments. 
C)  Are reported at their cost, no matter what their market value. 
D)  Include only debt securities. 
E)  Include only equity securities.

Question 6

On February 15, Jewel Company buys 7,000 shares of Marcelo Corp. common stock at $28.53 per share plus a brokerage fee of $400. The stock is classified as long-term available-for-sale securities. This is the company's first and only investment in available-for-sale securities. On March 15, Marcelo declares a dividend of $1.15 per share payable to stockholders of record on April 15. Jewel received the dividend on April 15 and ultimately sells half of the Marcelo 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:

Accepted Answer

A)  Debit Long-Term Investments-HTM $199,710; credit Cash $199,710. 
B)  Debit Long-Term Investments-Trading $200,110; credit Cash $200,110. 
C)  Debit Long-Term Investments-Trading $199,710; credit Cash $199,710. 
D)  Debit Long-Term Investments-AFS $199,710; credit Cash $199,710. 
E)  Debit Long-Term Investments-AFS $200,110; credit Cash $200,110. 
A)  Debit Long-Term Investments-HTM $199,710; credit Cash $199,710. 
B)  Debit Long-Term Investments-Trading $200,110; credit Cash $200,110. 
C)  Debit Long-Term Investments-Trading $199,710; credit Cash $199,710. 
D)  Debit Long-Term Investments-AFS $199,710; credit Cash $199,710. 
E)  Debit Long-Term Investments-AFS $200,110; credit Cash $200,110.

Question 7

A company that is a controlling investor in another company is known as the ________.

Accepted Answer

The answer of A company that is a controlling investor...

Question 8

Long-term investments include investments in land or other assets not used in a company's operations.

Accepted Answer

A) True 
 B)False

Question 9

Six months ago, a company purchased an investment in stock for $70,000. The investment is classified as available-for-sale securities. This is the company's first and only investment in available-for-sale securities. The current fair value of the stock is $68,500. The company should record a:

Accepted Answer

A)  Credit to Unrealized Gain-Equity for $1,500. 
B)  No entry is required. 
C)  Credit to Investment Revenue for $1,500. 
D)  Debit to Unrealized Loss-Equity for $1,500. 
E)  Debit to Investment Revenue for $1,500. 
A)  Credit to Unrealized Gain-Equity for $1,500. 
B)  No entry is required. 
C)  Credit to Investment Revenue for $1,500. 
D)  Debit to Unrealized Loss-Equity for $1,500. 
E)  Debit to Investment Revenue for $1,500.

Question 10

Weston Company had the following long-term available-for-sale securities in its portfolio at December 31, Year 1. Weston had several long-term investment transactions during the next year. After analyzing the effects of each transaction, (1) determine the amount Weston should report on its December 31, Year 1 balance sheet for its long-term investments in available-for-sale securities,
(2) determine the amount Weston should report on its December 31, Year 2 balance sheet for its long-term investments in available-for-sale securities, (3) prepare the necessary adjusting entry to record the fair value adjustment at December 31, Year 2.
 
 $\begin{array}{l|l|l}
\text { Available-for-Sale Securities (LT) } & \text { Cost } & \text { Fair } \
&&\text { Value } \
\hline 40,000 \text { shares of Beach common stock } & \$ 497,500 & \$ 488,900 \
\hline 15,000 \text { shares of Danfield common stock } & 410,200 & 412,600 \
\hline 18,000 \text { shares of Cardinal common stock } & 399,600 & 382,500 \
\hline
\end{array}$

$\begin{array}{l|l}
\hline \text { Jan. 22 } & \begin{array}{l}
\text { Sold } 9,000 \text { shares of Cardinal common stock for } \$ 203,000 \text { less a brokerage fee } \
\text { of } \$ 850 .
\end{array} \
\hline \text { Mar. 17 } & \begin{array}{l}
\text { Purchased 30,000 shares of Apex common stock for } \$ 995,000 \text { plus a brokerage } \
\text { fee of } \$ 2,500 . \text { The shares represent a } 30 \% \text { ownership in Apex. }
\end{array} \
\hline \text { Jun. 10 } & \begin{array}{l}
\text { Purchased 108,000 shares of Desert Springs common stock for } \$ 1,525,000 \text { plus } \
\text { a brokerage fee of } \$ 4,200 \text {. The shares represent a } 54 \% \text { ownership in Desert } \
\text { Springs. }
\end{array} \
\hline \text { Nov. 01 } & \text { Purchased 12,000 shares of Cliff common stock for } \$ 223,500 \text { plus a brokerage }
\end{array}$
 $\begin{array}{l|l|l}
\text { Available-for-Sale Securities (LT) } & \text { Cost } & \text { Fair } \
&&\text { Value } \
\hline 40,000 \text { shares of Beach common stock } & \$ 497,500 & \$ 488,900 \
\hline 15,000 \text { shares of Danfield common stock } & 410,200 & 412,600 \
\hline 18,000 \text { shares of Cardinal common stock } & 399,600 & 382,500 \
\hline
\end{array}$

$\begin{array}{l|l}
\hline \text { Jan. 22 } & \begin{array}{l}
\text { Sold } 9,000 \text { shares of Cardinal common stock for } \$ 203,000 \text { less a brokerage fee } \
\text { of } \$ 850 .
\end{array} \
\hline \text { Mar. 17 } & \begin{array}{l}
\text { Purchased 30,000 shares of Apex common stock for } \$ 995,000 \text { plus a brokerage } \
\text { fee of } \$ 2,500 . \text { The shares represent a } 30 \% \text { ownership in Apex. }
\end{array} \
\hline \text { Jun. 10 } & \begin{array}{l}
\text { Purchased 108,000 shares of Desert Springs common stock for } \$ 1,525,000 \text { plus } \
\text { a brokerage fee of } \$ 4,200 \text {. The shares represent a } 54 \% \text { ownership in Desert } \
\text { Springs. }
\end{array} \
\hline \text { Nov. 01 } & \text { Purchased 12,000 shares of Cliff common stock for } \$ 223,500 \text { plus a brokerage }
\end{array}$

Nov. 01 Purchased 12,000 shares of Cliff common stock for $223,500 plus a brokerage fee of $450. The shares represent a 10% ownership.
Dec. 31 At December 31, Year 2, the fair values of its investments are: Beach, $502,500; Danfield, $411,800; Cardinal, $203,100; Apex, $1,113,250; Desert Springs,$1,576,000; Cliff, $224,750.

Accepted Answer

Year 1: $1,307,300 — $1,284,000 = $23,30

Question 11

The investee company in a long term investment with controlling interest is called the:

Accepted Answer

A)  Subsidiary. 
B)  Parent. 
C)  Senior entity. 
D)  Owner. 
E)  Creditor. 
A)  Subsidiary. 
B)  Parent. 
C)  Senior entity. 
D)  Owner. 
E)  Creditor.

Question 12

Barnes Company purchased $50,000 of 8% bonds at par. The bonds mature in six years and are a held-to-maturity security. Which of the following is the correct journal entry to record the receipt of the semiannual interest payment?

Accepted Answer

A)  debit Cash, $2,000; credit Interest Revenue, $2,000. 
B)  debit Cash, $4,000; credit Long-Term Investments-HTM, $4,000. 
C)  debit Unrealized Gain-Equity, $2,000; credit Cash, $2,000. 
D)  debit Cash, $4,000; credit Unrealized Gain-Equity, $4,000. 
E)  debt Cash, $2,000; credit Long-Term Investments-HTM, $2000. 
A)  debit Cash, $2,000; credit Interest Revenue, $2,000. 
B)  debit Cash, $4,000; credit Long-Term Investments-HTM, $4,000. 
C)  debit Unrealized Gain-Equity, $2,000; credit Cash, $2,000. 
D)  debit Cash, $4,000; credit Unrealized Gain-Equity, $4,000. 
E)  debt Cash, $2,000; credit Long-Term Investments-HTM, $2000.

Question 13

A company paid $37,800 plus a broker's fee of $525 to acquire 8% bonds with a $40,000 maturity value. The company intends to hold the bonds to maturity. The cash proceeds the company will receive when the bonds mature equal:

Accepted Answer

A)  $40,000. 
B)  $40,525. 
C)  $43,200. 
D)  $37,800. 
E)  $38,325. 
A)  $40,000. 
B)  $40,525. 
C)  $43,200. 
D)  $37,800. 
E)  $38,325.

Question 14

On January 4, Year 1, Barber Company purchased 5,000 shares of Convell Company for $59,500 plus a broker's fee of $1,000. Convell Company has a total of 25,000 shares of common stock outstanding and it is presumed the Barber Company will have a significant influence over Convell. During each of the next two years, Convell declared and paid cash dividends of $0.85 per share, and its net income was $72,000 and $67,000 for Year 1 and Year 2, respectively. 
-The January 12, Year 3, entry to record Barber's sale of 3,000 shares of Convell Company stock, which represents 60% of Barber's total investment, for $39,000 cash should be:

Accepted Answer

A)  Debit Cash $39,000; debit Loss on Sale of Investment $21,500; credit Long-Term Investments $60,500. 
B)  Debit Cash $39,000; debit Loss on Sale of Investment $8,200; credit Long-Term Investments $47,280. 
C)  Debit Cash $39,000; debit Loss on Sale of Investment $8,880; credit Long-Term Investments $47,880. 
D)  Debit Cash $39,000; credit Gain on Sale of Investment $8,750; credit Long-Term Investments $30,250. 
E)  Debit Cash $39,000; credit Gain on Sale of Investment $2,700; credit Long-Term Investments $36,300. 
A)  Debit Cash $39,000; debit Loss on Sale of Investment $21,500; credit Long-Term Investments $60,500. 
B)  Debit Cash $39,000; debit Loss on Sale of Investment $8,200; credit Long-Term Investments $47,280. 
C)  Debit Cash $39,000; debit Loss on Sale of Investment $8,880; credit Long-Term Investments $47,880. 
D)  Debit Cash $39,000; credit Gain on Sale of Investment $8,750; credit Long-Term Investments $30,250. 
E)  Debit Cash $39,000; credit Gain on Sale of Investment $2,700; credit Long-Term Investments $36,300.

Question 15

Hubbard 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.
$\begin{array} { l l l } 
& & \text { Fair } \
\text { Short-Term Investments } & \text { Cost } & \text { Value } \
\text { XBM } & \$ 24,500 & \$ 25,900 \
\text { Micro } & 51,000 & 48,600 \
\text { Outel } & 62,300 & 61,000 \
\text { Dull } & \underline { 29,900 } & \underline { 30,200 } \
\text { Totals } & \underline { \$ 167,700 } & \underline { \$ 165,700 }
\end{array}$

Accepted Answer

None

Question 16

A company had net income of $43,000, net sales of $380,500, and average total assets of $220,000. Its profit margin and total asset turnover were, respectively:

Accepted Answer

A)  11.3%; 19.5. 
B)  11.3%; 1.73. 
C)  1.7%; 11.3. 
D)  19.5%; 11.3. 
E)  1.7%; 19.5. 
A)  11.3%; 19.5. 
B)  11.3%; 1.73. 
C)  1.7%; 11.3. 
D)  19.5%; 11.3. 
E)  1.7%; 19.5.

Question 17

When a U.S. company makes a credit sale to an international customer and the sale terms are for payment in a foreign currency, the foreign exchange rate used to record the sale is the exchange rate:

Accepted Answer

A)  Thirty days from the date of sale. 
B)  On the date of the sale. 
C)  At the end of the buyer's fiscal year. 
D)  At the end of the seller's fiscal year. 
E)  On the date final payment is made. 
A)  Thirty days from the date of sale. 
B)  On the date of the sale. 
C)  At the end of the buyer's fiscal year. 
D)  At the end of the seller's fiscal year. 
E)  On the date final payment is made.

Question 18

All of the following statements regarding other comprehensive income are true except:

Accepted Answer

A)  Other comprehensive income includes pension adjustments. 
B)  Other comprehensive income includes unrealized gains and losses on available-for-sale securities. 
C)  Other comprehensive income is not considered when calculating comprehensive income. 
D)  Other comprehensive income includes foreign currency adjustments. 
E)  Accumulated other comprehensive income is defined as the cumulative impact of other comprehensive income. 
A)  Other comprehensive income includes pension adjustments. 
B)  Other comprehensive income includes unrealized gains and losses on available-for-sale securities. 
C)  Other comprehensive income is not considered when calculating comprehensive income. 
D)  Other comprehensive income includes foreign currency adjustments. 
E)  Accumulated other comprehensive income is defined as the cumulative impact of other comprehensive income.

Question 19

Investments in trading securities are accounted for using the equity method with consolidation.

Accepted Answer

A) True 
 B)False

Question 20

On October 31, Augustas Co. received cash dividends of $0.15 per share from its investment in Lamb Corp.'s common stock. Augustas owned 1,200 shares of Lamb Corp.'s stock on October 31. The investment is considered available-for-sale. Prepare the investor's journal entry to record the receipt of the cash dividends.

Accepted Answer

Oct 31 Cash (1,200 *

Exam 15: Investments

Held-to-maturity securities are:

Explain how transactions (both sales and purchases) in a foreign currency are recorded and reported.

If the exchange rate for Canadian and U.S. dollars is 0.82777 to 1, this implies that 3 Canadian dollars will buy ________ worth of U.S. dollars.

An investing company that owns ________ of another (investee) company's voting stock (but not more than 50%) is presumed to have a significant influence over the investee.

Investments in trading securities:

A company that is a controlling investor in another company is known as the ________.

Long-term investments include investments in land or other assets not used in a company's operations.

Six months ago, a company purchased an investment in stock for $70,000. The investment is classified as available-for-sale securities. This is the company's first and only investment in available-for-sale securities. The current fair value of the stock is $68,500. The company should record a:

The investee company in a long term investment with controlling interest is called the:

Barnes Company purchased $50,000 of 8% bonds at par. The bonds mature in six years and are a held-to-maturity security. Which of the following is the correct journal entry to record the receipt of the semiannual interest payment?

A company paid $37,800 plus a broker's fee of $525 to acquire 8% bonds with a $40,000 maturity value. The company intends to hold the bonds to maturity. The cash proceeds the company will receive when the bonds mature equal:

A company had net income of $43,000, net sales of $380,500, and average total assets of $220,000. Its profit margin and total asset turnover were, respectively:

When a U.S. company makes a credit sale to an international customer and the sale terms are for payment in a foreign currency, the foreign exchange rate used to record the sale is the exchange rate:

All of the following statements regarding other comprehensive income are true except:

Investments in trading securities are accounted for using the equity method with consolidation.

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories and Cost of Sales

Accounting Information Systems

Cash and Internal Controls

Accounting for Receivables

Plant Assets Natural Resoures and Intangibles

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Accounting for Corporations

Long-Term Liabilities

Reporting the Statement of Cash Flows

Analysis of Financial Statements

Managerial Accounting Concepts and Principles

Job Order Costing

Process Costing

Cost-Volume-Profit Analysis

Master Budgets and Planning

Flexible Budgets and Standard Costs

Performance Measurement and Responsibility Accounting

Capital Budgeting and Managerial Decisions

Present and Future Values in Accounting

Activity-Based Costing

Filters