Exam 13: Investments

On January 1,2018,Winston Company purchased 6% bonds with a face value of $62,000 for par.Winston Company intends to hold the bonds until maturity and has the ability to do so.Interest is payable semiannually on July 1 and January 1.The company's fiscal year ends on December 31.The journal entry on July 1,2018 is:

Unrealized gains on equity securities when the investor has insignificant influence are reported on the:

Investments with insignificant influence:

On January 1 of the current year,Conner Corporation purchased 100,000 of the 400,000 shares of outstanding stock of JJ Company for $560,000.Net income reported by JJ Company for the year was $600,000.Dividends declared and paid by JJ Company during the year were $130,000.The Equity-method Investment will be reported on Conner Corporation's December 31 balance sheet for the current year in the amount of:

When an investment is readily convertible to cash and the investor plans to convert the investment to cash within one year,the investment is reported on the balance sheet as:

To be classified as a current asset,an investment must either be liquid or the investor must intend to use it to pay a current liability.

Consolidated financial statements are prepared for the:

On January 1,2019,Brooklyn Company purchases $82,000,8% bonds at a price of 90 and a maturity date of January 1,2029.Brooklyn Company intends to hold the bonds until maturity and has the ability to do so.Interest is paid semiannually,on January 1 and July 1.Brooklyn Company has a calendar year and uses the straight-line amortization method for discounts and premiums.The adjusting entry to amortize the bond discount or premium on December 31,2019 is:

The consolidation accounting method is appropriate when an investor controls an investee by ownership of more than 50% of the investee's voting stock.

An investor receives a cash dividend from an investment with 3% ownership and insignificant influence.Which journal entry is required?

An investor receives a cash dividend from an investment with 48% ownership and significant influence.Which journal entry is required?

Under the equity method of accounting for long-term investments in common stock,when a cash dividend is received from the investee company:

If an investor owns between 20% and 50% of an investee's voting stock,it is assumed that the investor has significant influence over the investee.

Wolverine Corporation owns 27% of Buckeye Corporation.Net income for Buckeye for the year is $300,000.The journal entry prepared by Wolverine Corporation is:

On January 1,2019,Walker Company pays $10 million for 40% of the voting stock of a supplier,Dorglass,Inc.On December 1,2019,Dorglass declared and paid cash dividends of $100,000.For the year ending December 31,2019,Dorglass also reported net income of $1,000,000.At December 31,2019,the fair value of 40% of Dorglass's stock was $9 million.On January 1,2020,all the Dorglass stock was sold for $9 million. Required: Prepare journal entries on the following dates: 1.January 1,2019 2.December 1,2019 3.December 31,2019 4.January 1,2020 Explanations are not required.

An investor owns 28% of the outstanding common stock of Stokes Corporation.Stokes Corporation declares and pays a $60,000 dividend.Which journal entry should the investor prepare?

An investor owns 32% of the outstanding common stock of Leshan Company.Leshan Company reports net income of $90,000 for the current year.Which journal entry should the investor prepare?

Smith Corporation purchases $620,000 of TMI Corporation's stock on October 18,2020 at cost.Smith owns less than 2% of TMI's outstanding shares,and thus has insignificant influence.On December 1,2020,Smith Corporation received a cash dividend of $12,000 on the TMI Corporation's stock.On December 31,2020,Smith Corporation's investment in TMI Corporation has a fair value of $600,000. Required: Prepare the necessary journal entries.Explanations are not required.

Investments in equity securities with insignificant influence were purchased for $400,000,and had a fair value of $410,000 at the end of the year.The adjusting entry to record this difference includes a credit to:

Under the equity method,if the investee company has a net loss,the investor company will ________ for its share of the net loss.