Exam 13: Investments and Long-Term Receivables

On January 1, 2015 Chase sold land to Run Company, accepting a 3-year $200,000 non-interest-bearing note due January 1 ,2018. The fair value of the land is $146,238. The land was originally purchased for $136,500 on January 1, 2010. An appropriate rate of interest for a note of this caliber is 11% Required: Prepare all the journal entries in Chase's books for the Jamuary 1,2015 through January 1, 2018, in regards to the Run note.

On September 1, 2015, WV, Inc., bought $60,000 of MD Printer' 20-year, 6% bonds dated January 1, 2014, for $56,920 plus accrued interest. The bonds pay interest annually and are classified as held-to-maturity. On September 1, 2025, WV sold one-fourth of these bonds for $15,000 plus accrued interest. No entries relating to the bonds had been made since December 31, 2024. Straight-line amortization was used. Required: Record the sale of these bonds.

On January 1, 2014, the Leaf Company acquired a 5% interest in the Trunk Corporation through the purchase of 100,000 shares of Trunk's common stock for $640,000; the investment is recorded on Leaf's books as available-for-sale. During 2014, Trunk paid $40,000 in dividends and reported net income of $100,000. The market price of Trunk's common stock was $6.20 per share on December 31, 2014. Leaf should report the investment in the Trunk Corporation on its December 31, 2014, balance sheet at

The Plutonium Company has a bond investment classified as held-to-maturity, which has a carrying value of $62,000 and a fair value of $24,000. The decline in value is considered as other than temporary. Plutonium should record the decline as

Unrealized holding gains and losses occur because a company

What is a long-term fund and list the three most common long-term funds that a company would report as investments on its balance sheet.

Exhibit 13-1 On January 1, 2014, Oak Corporation paid $900,000 for 80,000 shares of Beech Company's common stock, which represents 35% of Beech's outstanding common stock. Beech reported income of $300,000 and paid a cash dividend of $100,000 during 2014. -Refer to Exhibit 13-1. Oak should report the investment in Beech Company on its December 31, 2014, balance sheet at

The use of the effective interest method to amortize a discount associated with the acquisition of an investment in bonds results in

Realized gains and losses on investments available-for-sale are reported

Under the equity method, dividends received by the investor should be recorded as

On January 1, 2015, Waters Corp. bought $25,000 of Violet Co.'s 9% ten-year bonds for $25,300 to yield 8%. The bonds pay interest annually and are classified as held-to-maturity. Required: Using the effective interest method, journalize the receipt of the interest and amortization at December 31, 2016.

The journal entry to recognize the impairment of a note receivable includes a

Which of the following statements regarding available-for-sale equity investments is true?

Investment securities are classified based upon management's intent. This may present difficulties to readers of financial statements because

On January 1, 2014, Peach, Inc. purchased 40% of the common stock of Apple Company for $61,000. At the date of acquisition, the following information for Apple Company was available: In 2014, Apple earned $18,000 of net income and distributed $12,500 of dividends. How much investment income would Peach record in 2014?

When selecting the appropriate accounting for held-to-maturity securities, the company must

Exhibit 13-1 On January 1, 2014, Oak Corporation paid $900,000 for 80,000 shares of Beech Company's common stock, which represents 35% of Beech's outstanding common stock. Beech reported income of $300,000 and paid a cash dividend of $100,000 during 2014. -Refer to Exhibit 13-1. Oak should report income from the investment in Beech Company for 2014 of

Which of the following disclosures is not required for investments in securities by current GAAP?

During January 2015, Long Corporation for the first time decided to acquire some equity securities as a means of putting some of its idle cash to work. The securities are classified as investments available-for-sale. At March 31, when Long prepares its first quarter financial statements, the following information about the acquired securities is available: Required: a.Prepare the journal entries to record the acquisition in January and valuation at the end of the first quarter of 2015. b.Assume that on June 30, 2015, the company still has this same portfolio. The market value of 1 is $57,000, 2 is $30,000, and 3 is $31,000. What journal entry, if any, should be prepared at the end of the second quarter? c.On August 15, 2015, Long Corporation sold Security 3 for $33,000. Prepare the journal entry to record this transaction.

Bark Corporation began operations on January 1, 2014. At December 31, 2014, Bark appropriately had a credit balance in Allowance for Change in Fair Value of Investments of $330. No transactions related to these investments occurred during 2015, and the cost and market values on December 31, 2015, are as follows: In the December 31, 2015 adjusting entry, there will be a