Exam 13: Investments

Michael Company's investment in equity securities with insignificant influence had a fair value of $31,700 at the end of the prior year.Management decided to sell the investment.The investment was purchased for $27,800.If Michael Company sold this investment for $50,200,Michael will have a(n):

Consolidated financial statements combine the financial statements of the parent company and its subsidiaries.

The Investment in Equity Securities account when the investor has insignificant influence is reported on the:

Held-to-maturity investments in bonds are initially reported at ________ on the purchase date.On a subsequent balance sheet date,the bonds are reported at ________.

Both trading and available-for-sale investments in debt securities are accounted for using the fair value method in a way that is similar to how investments in equity securities with insignificant influence are accounted for.

Under the equity method,the investor applies his percentage of ownership in recording his share of the investee's net income,but not dividends.

Under the equity method,when the investee reports net income,the Equity-method Investment account increases.

All investments in debt securities NOT classified as trading securities or held-to-maturity securities are classified as:

If the equity method is used to account for a long-term investment in common stock,cash dividends received from the investee are recorded by the investor as:

Investments with insignificant influence are reported on the:

In consolidation accounting,a year-end elimination entry is required to add the subsidiary company's stockholders' equity accounts to those of the parent company.

Daniel Company purchased 34% of the outstanding shares of Clooney Corporation on January 1 at a cost of $620,000.Clooney Corporation reported net income of $93,000 and declared and paid total dividends of $20,000 for the year.At the end of the year,Clooney shares had a current fair value of $614,000.After all necessary adjusting entries are made for the year,the balance in Daniel Company's Equity-method Investment account will be:

After the work sheet is complete,the consolidated amount for each account represents the total asset,liability,and equity amounts controlled by the parent corporation.

A controlling interest enables the investor to elect a majority of the members of the investee's board of directors and thus control the investee's policies.

At maturity,the carrying amount of a bond should be equal to its face value.

Marathon Corporation owns 500 shares of Mini Company's common stock.Mini Company has 100,000 shares of common stock outstanding.Marathon Corporation is the ________ and Mini Company is the ________.

At the beginning of the year,an investment in equity securities with insignificant influence was purchased for $400,000,and it has a fair value of $420,000 at the end of the year.The year-end journal entry will have a credit to:

The market prices of bonds fluctuate inversely with market interest rates.

Jones Corporation purchases $500,000 of Basic Corporation's stock on October 1,2020 at cost.Jones owns less than 2% of Basic's outstanding shares,and thus has insignificant influence.On December 1,2020 Jones Corporation received a cash dividend of $15,000 on the Basic Corporation's stock.On December 31,2020,Jones Corporation's investment in Basic Corporation has a fair value of $550,000. Required: Prepare the necessary journal entries.Explanations are not required.

Under the equity method,the Equity-method Investment account is debited when the: