Exam 9: Intercorporate Entities

Securities that are purchased in order to take advantage of short-term changes in market value should be classified as ____________________ securities.

You are trying to determine the functional currency of a foreign unit. For the following three factors determine what conditions would result in the foreign currency being the functional currency:

Under which of the following scenarios would an entity not be classified as a variable interest entity?

Coffee Comp. purchased 40% of the outstanding shares of Cream Corp. for $1,854,000. The investment allows Coffee to exert significant influence over the operations of Cream. During 2005 Cream recognized net income of $2,450,000 and paid $560,000 in dividends. Discuss how Coffee should account for its investment in Cream and how the information would appear in Coffee's balance sheet, income statement, and cash flow statement.

Which of the following is an acceptable method of accounting for employee stock options?

Under the fair value method of accounting for stock options, firms must value of stock options on the

Stock Trader, Inc. began operations in 2005. Stock Trader has acquired a number of equity investments during 2005. None have been sold. Stock Trader exerts no influence over any of its investments each of which represents a small percentage of the investee. An analysis of Stock Trader's investment portfolios shows the following totals at December 31, 2005: Based on the information provided, describe how Stock Trader would present this information in its financial statements. You should discuss what amounts would appear in each financial statement.

Unrealized holding gains and losses from investments classified as trading are reported in the ___________________________________.

The _________________________ is the date a firm gives a stock option to employees.

When a foreign entity has the U.S. dollar as its functional currency, it uses which exchange rate to translate monetary assets and liabilities?

Examine the five following cases and determine if the functional currency of a U.S. parent's foreign unit is the foreign currency or the U.S. Dollar.

Graham Corporation accounts for its investment in the common stock of Luke Company under the equity method. Graham Corporation should ordinarily record a cash dividend received from Luke as

The first date at which employees can exercise their stock options is termed the _________________________.

Unrealized gains and losses that appear in accumulated other comprehensive income are from securities classified as ___________________________________ securities.

Snowflake, Corp. Penguin, Inc. acquires 100% of the outstanding shares of Snowflake Corp. for $2,250,000 and accounts for the transaction using the purchase method. Snowflake's balance sheet at the acquisition date is as follows: Based on the information concerning Snowflake Corp. by what amount would Penguin increase depreciable assets when it consolidates Snowflake on the acquisition date?

Below you will find the balance sheet and income statement of a US Corp.'s foreign subsidiary at the end of its first year of operations. The following exchange rates were in effect during the period: Jan. 1, 2005 - $1 = 1FC Dec. 31, 2005 - $1.70 = 1FC The average exchange rate during the period was $1.40=1FC. The common stock was issued on January 1, 2005. Assuming that the foreign currency is the functional currency translate the financial statements into U.S. dollars.

Ashley Company purchased 2,000 of the 10,000 outstanding shares of Judd, Inc.'s common stock for $60,000 on January 1, 2005. During 2005, Judd declared a dividend of $5 per share and reported net income of $75,000. At the end of 2005 the market value of a share of Judd, Inc. stock has increased to $32 per share. If Ashley Company accounts for the investment as a minority, passive investment and classifies it as a available-for-sale security the investment will appear in the December 31, 2005 balance sheet at what amount?

Which of the following is not a classification for a minority, passive investment?

Ashley Company purchased 2,000 of the 10,000 outstanding shares of Judd, Inc.'s common stock for $60,000 on January 1, 2005. During 2005, Judd declared a dividend of $5 per share and reported net income of $75,000. At the end of 2005 the market value of a share of Judd, Inc. stock has increased to $32 per share. If Ashley Company accounts for the investment as a minority, active investment and uses the equity method to account for the investment, the investment will appear in the December 31, 2005 balance sheet at what amount?

The functional currency of a foreign unit whose receivables and payables are denominated in foreign currency and not usually remitted to parent company is the ______________________________.