Exam 13: Investments and Long-Term Receivables

At December 31, 2015, Williams had the following portfolio of equity securities available-for-sale: Required: a.Assuming any gain or loss is considered to be temporary, prepare the adjusting entry required under current GAAP. b.Assuming that, in 2016, William’s sold the Nathan Co. stock for $83, record the sale. c.Assuming that the portfolio at the end of 2016 is composed of the following holdings, prepare any necessary entry. d.Assuming that the portfolio at the end of 2017 is composed of the following holdings, prepare any necessary entry. e.Assuming that, in 2018, the Jacob Co. bonds were reclassified as held-to-maturity when the market value was $94, prepare any necessary entry.

The intent to purchase investments to profit on short-term changes in price a company would classify these investments as available-for-sale.

On January 1, 2015 Chester sold land to Melissa's Company, accepting a 3-year $75,000 non-interest-bearing note due in three equal installments of $25,000 beginning December 31, 2015. The land had a book value of $55,000, the fair value for the land was not determinable. An appropriate interest rate for a note of this caliber is 9% Required: Prepare the journal entries on Chester's books to record: 1) the sale 2) the annual interest income and receipt of each $25,000 installment

On January 1, 2015, the Widner Company acquired 12% bonds with a face value of $350,000 and classified as held-to-maturity. The bonds pay interest on June 30 and December 31, and mature on December 31, 2024. Required: a. Assume the bonds were acquired for $323,515 to yield 14%. Prepare an investment discount amortization schedule for the first year of the investment, using the effective interest method. Round all calculations to the nearest dollar. b. Assume the bonds were acquired for $381,156 to yield 10%. Prepare an investment premium amortization schedule for the first year of the investment using the effective interest method. Round all calculations to the nearest dollar.

Fish Galore Corp. bought 25% of Fin Chaser Corporation's stock for $70,000 on January 1, 2014. During 2014, Fin Chaser earned $25,000 of net income (80% ordinary and 20% extraordinary) and distributed $15,000 of dividends on December 31, 2014. Required: Present all related 2014 entries on Fish Galore Corp.'s books, including the January 1 investment.

On January 1, 2014, Old World Company purchased $300,000 of ten-year 10% bonds of New Company for $326,840. Interest is payable annually. The effective yield on the investment is 8%. What is the balance in Old World's investment in held-to-maturity debt securities account (rounded to the nearest dollar, if necessary) at December 31, 2015?

For an investment classified as held-to-maturity any unrealized gains and losses are recorded, as well as disclosed in the notes to the financial statements.

A transfer of a security between categories is accounted for at the

List 3 investments in debt securities and 3 investments in equity securities.

On January 1, 2014, Trevor bought 6% of Joseph Company's common stock for $20,000. During 2014, Joseph earned $6,000 of net income and distributed $4,400 of dividends. On January 1, 2015, Trevor bought an additional 35% of Joseph stock. The fair value of the Joseph shares owned by Trevor was $21,000 on December 31, 2014. Assume that the Joseph stock had been classified as available-for-sale during 2014, and the acquisition of the additional 35% of Joseph at the beginning of 2015 gave Trevor significant influence. Required: Prepare the appropriate entries for Trevor on January 1, 2015, as a result of the additional acquisition and change in ownership classification.

Investments in debt securities include all of the following except

A note receivable should always be recorded at its present value using the borrower's incremental interest rate.

All of the following statements regarding held-to-maturity debt securities are true except

The generally accepted accounting principles for trading securities include all of the following except

On January 1, 2014, Casey Company acquires a 30% interest in Hill Company by purchasing 6,000 shares of its 20,000 common stock for $16 per share. On January 1, 2014, the net assets of Hill Company were as follows: During 2014, Hill reported net income of $200,000 and paid cash dividends of $80,000. Required: Prepare all journal entries on Casey's books to record the acquisition, dividends, and income from the investment in Hill Company.

On July 1, 2017, Rectangle, Inc. purchased Diamond Company's five-year 12% bonds with a face value of $500,000 for $569,000, which included $25,000 of accrued interest. The bonds, which mature on February 1, 2022, are to be held-to-maturity and pay interest on February 1 and August 1. Rectangle uses the straight-line method of amortization. The amount of income that Triangle would report for the calendar year 2017 as a result of this long-term investment would be

With the equity method, the investor recognizes its share of the earnings of the subsidiary when the

Exhibit 13-03 On January 1, 2014, Train, Inc. accepts an $80,000, non-interest bearing 3 year note in exchange for equipment it sold to Steam Company. Train originally purchased the equipment for $125,000 and had a book value of $75,000 on the date of the sale. The note was non-interest-bearing. An assumed 11% interest rate is implicit in the agreement. Actual information for 11%, three periods, follows: -Refer to Exhibit 13-03. What amount would Train show as the balance for Discount on Notes Receivable on December 31, 2015?

In its first year of operations, Roger Company purchased trading securities at a total cost of $53,000. On December 31, the end of Roger's fiscal year, the fair market value of those investments totaled $57,000. As a result of these investments, Roger Company will report

For available-for-sale equity securities, the receipt of a cash dividend would be reported as