Exam 13: Investments and Fair Value Accounting

On January 1, 2014, Blanton Company's Valuation Allowance for Trading Investments account has a debit balance of $23,200. On December 31, 2014, the cost of the trading securities portfolio was $80,000. The fair value was $98,000. Which of the following would Blanton report on the income statement for 2014?

On August 1, 2011, Airport Company sold Paxton Company $1,000,000 of 10-year, 6% bonds, dated July 1 at 100 plus accrued interest. On March 1, 2012, Paxton sold half of the bonds for $520,000 plus accrued interest. Present entries to record the following transactions:

If the proceeds from the sale of bond investments exceeds the carrying amount of the bonds, a gain is realized.

Journalize the entries to record the following selected transactions of Oliver Co.:

Sutton Company purchased 10% of the outstanding stock of Roberts Company on January 1, 2012. Roberts reported net income of $155,000 and declared dividends of $40,000 during 2012. How would these events be reported by Sutton using the cost method?

Purchased $400,000 of ABC Co. 5% bonds at 100 plus accrued interest of $4,500. Sold $250,000 of bonds at 97 plus accrued interest. The journal entry for the sale would include:

Which of the following is not a part of comprehensive income?

The account Unrealized Gain (Loss) on Available-For-Sale Securities should be included in the

Held-to-Maturity securities

In general, consolidated financial statements should be prepared

Comprehensive income is all changes in stockholders' equity during the period except those resulting from dividends and stockholders' investments.

Ordinarily, a corporation owning more than 20% and less than 50% of voting stock of another corporation accounts for the investment using the equity method.

Herberto Company had a net income of $74,000, and other comprehensive loss of $8,500 for 2012. On January 1, 2012, the Retained Earnings balance was $425,000 and the Accumulated Other Comprehensive Income balance was $52,000. Determine the (a) comprehensive income for 2012, (b) Retained Earnings balance on December 31, 2012, and (c) the Accumulated Other Comprehensive Income on December 31, 2012.

Blanton Corporation purchased 35% of the outstanding shares of common stock of Worton Corporation as a long-term investment. Subsequently, Worton Corporation reported net income and declared and paid cash dividends. What journal entry would Blanton Corporation use to record the dividends it receives from Worton Corporation?

All of the following are disadvantages of fair value use except:

In order to maintain the original value of a trading security, the fair value adjustments are debited or credited to the account Valuation Allowance for Trading Investments.

On October 1, 2012, Marcus Corporation purchased $20,000 of 6% bonds of Roberts Corporation, due in 8 1/2 years. The bonds were purchased at a price of $17,561 plus interest of $300 accrued from July 1, 2012, the date of the last semi-annual interest payments. Journalize the purchase.

The corporation owning all or a majority of the voting stock of another corporation is known as the parent company.

The equity method is usually more appropriate for accounting for investments where the purchaser does not have significant influence over the investee.

Under the equity method, the receipt of cash dividends on an investment in common stock of Vallerio Corporation is accounted for as a debit to Cash and a credit to