Exam 13: Investments and Fair Value Accounting

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.

On February 12,Addison,Inc.purchased 6,000 shares of Lucas Company at $22 per share plus a $240 brokerage fee.On August 22,Lucas paid a $0.42 dividend per share.On November 10,4,000 shares of Lucas stock were sold for $28 per share less a $160 brokerage fee.The journal entry to record the purchase would include:

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.

Gerardo Company had a net income of $75,000,and other comprehensive income of $12,500 for 2012.On January 1,2012,the Retained Earnings balance was $525,000 and the Accumulated Other Comprehensive Income balance was $55,000.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.

Accounting for the sale of stock is the same for both the cost and the equity methods of accounting for investments.

A company that has 25,000 shares of $5.00 par value common stock issued and outstanding paid a dividend of $0.40 per share.The market value of the stock is $16 per share.The company's dividend yield is:

Parker Company owns 83% of the outstanding stock of Tadeo Company.Parker Company is referred to as the

An investor purchased 500 shares of common stock,$25 par,for $21,750.Subsequently,100 shares were sold for $49.50 per share.What is the amount of gain or loss on the sale?

On June 1,$40,000 of treasury bonds were purchased between interest dates.The broker commission was $600.The bonds pay interest at 12%,which is paid semiannually on January 1 and July 1.How much interest revenue will be recorded on July 1?

On May 1,2015,Chase Inc.purchases $60,000 of 10-year,Manus Corporation 6% bonds dated March 1,2015 at 100 plus accrued interest.What entry would Chase record when receiving its semiannual interest on September 1?

Yankton Company began the year without an investment portfolio.During the year they purchased investments classified as trading securities at a cost of $13,000.At the end of the year,the market value of the securities was $11,000.The Yankton Company's financial statements for the current year should show

Prepare the journal entries for the following transactions for Morgan Co.

What is comprehensive income? How is it calculated? What are some examples of items included in other comprehensive income? Where is comprehensive income reported?

If one company owns more than 50% of the common stock of another company

Foreign currency translation adjustment is an example of an item that would be included in Other Comprehensive Income.

Which one of the following items below would not affect the investor's income for the period?

The income statement for Dodson Corporation reported net income of $22,400 for the year ended December 31,2012 before considering the following: During the year the company purchased available-for-sale securities.At year end,the fair value of the investment portfolio was $2,100 more than cost. The balance of retained earnings was $83,000 on December 31,2011.Dobson Corporation paid $9,000 in cash dividends in 2012.Calculate the balance of retained earnings on December 31,2012.

Blanton Corporation purchased 15% 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?

Financial statements in which financial data for two or more companies are combined as a single entity are called

Trading securities are reported on the balance sheet at cost.