Question 1

Held-to-maturity securities are ____________ securities a company intends and is able to hold until maturity.

Accepted Answer

The answer of Held-to-maturity securities are ____________ securities a company...

Question 2

Debt securities are recorded at cost when purchased.

Accepted Answer

A) True 
 B)False

Question 3

Savan Co. purchased 14,000 shares of Briton Corporation's 40,000 shares of common stock on January 1. This represented 35% of Briton's outstanding shares and gave Savan Co. significant influence over Briton's management and operations. On October 11, Briton declared and paid cash dividends of $30,000. On December 31, Briton reported net income of $125,000 for the year. Prepare the journal entries Savan Co. should record to account for the dividends received and the earnings reported by Briton Corporation.

Accepted Answer

The answer of Savan Co. purchased 14,000 shares of Briton...

Question 4

When using the equity method for investments in equity securities, the investor records the receipt of cash dividends as revenue.

Accepted Answer

A) True 
 B)False

Question 5

Wiffery Company had the following trading securities in its portfolio at December 31. The Fair Value Adjustment - Trading account had a balance of zero prior to year-end adjustment. Prepare the appropriate adjusting journal entry.

Accepted Answer

The answer of Wiffery Company had the following trading securities...

Question 6

Long-term investments in debt securities not classified as trading or held-to-maturity securities are classified as available-for-sale securities.

Accepted Answer

A) True 
 B)False

Question 7

Chung owns 40% of Lu's common stock. Lu pays $97,000 in total cash dividends to its shareholders. Chung's entry to record this transaction should include a:

Accepted Answer

A)  Debit to Dividends for $97,000. 
B)  Debit to Dividends for $38,800. 
C)  Debit to Long-Term investments for $97,000. 
D)  Credit to Long-Term Investments for $38,800. 
E)  Credit to Cash for $97,000. 
A)  Debit to Dividends for $97,000. 
B)  Debit to Dividends for $38,800. 
C)  Debit to Long-Term investments for $97,000. 
D)  Credit to Long-Term Investments for $38,800. 
E)  Credit to Cash for $97,000.

Question 8

Long-term investments in available-for-sale securities are reported at their _______ on the balance sheet.

Accepted Answer

The answer of Long-term investments in available-for-sale securities are reported...

Question 9

Eaton Company had the following long-term available-for-sale securities in its portfolio at December 31, Year 1. Eaton had several long-term investment transactions during the next year. After analyzing the effects of each transaction, (1) determine the amount Eaton should report on its December 31, Year 1 balance sheet for its long-term investments in available-for-sale securities, (2) determine the amount Eaton should report on its December 31, Year 2 balance sheet for its long-term investments in available-for-sale securities, (3) prepare the necessary adjusting entry to record the fair value adjustment at December 31, Year 2.

Accepted Answer

The answer of Eaton Company had the following long-term available-for-sale...

Question 10

Profit margin is net sales divided by net income.

Accepted Answer

A) True 
 B)False

Question 11

All of the following statements regarding equity securities are True except:

Accepted Answer

A)  Equity securities should be recorded at cost when acquired. 
B)  Equity securities are valued at fair value if classified as trading securities. 
C)  Equity securities are valued at fair value if classified as significant influence securities. 
D)  Equity securities are valued at fair value if classified as available-for-sale securities. 
E)  Equity securities classified as available-for-sale record the dividend revenue when received. 
A)  Equity securities should be recorded at cost when acquired. 
B)  Equity securities are valued at fair value if classified as trading securities. 
C)  Equity securities are valued at fair value if classified as significant influence securities. 
D)  Equity securities are valued at fair value if classified as available-for-sale securities. 
E)  Equity securities classified as available-for-sale record the dividend revenue when received.

Question 12

At acquisition, debt securities are:

Accepted Answer

A)  Recorded at their cost, plus total interest that will be paid over the life of the security. 
B)  Recorded at the amount of interest that will be paid over the life of the security. 
C)  Recorded at cost. 
D)  Not recorded, because no interest is due yet. 
E)  Recorded at cost plus the amount of dividend income to be received. 
A)  Recorded at their cost, plus total interest that will be paid over the life of the security. 
B)  Recorded at the amount of interest that will be paid over the life of the security. 
C)  Recorded at cost. 
D)  Not recorded, because no interest is due yet. 
E)  Recorded at cost plus the amount of dividend income to be received.

Question 13

Cash equivalents are investments that are readily converted to known amounts of cash and mature within three months.

Accepted Answer

A) True 
 B)False

Question 14

A company has net income of $130,500. Its net sales were $1,740,000 and its average total assets were $2,750,000. Its profit margin equals 7.5%.
Profit margin = $130,500/$1,740,000 = 7.5%

Accepted Answer

A) True 
 B)False

Question 15

Investments in trading securities are accounted for using the equity method with consolidation.

Accepted Answer

A) True 
 B)False

Question 16

When an investor company owns more than 25% of the voting stock of an investee company, it has a controlling influence.

Accepted Answer

A) True 
 B)False

Question 17

If the exchange rate for Canadian and U.S. dollars is 0.82777 to 1, this implies that 3 Canadian dollars will buy ____ worth of U.S. dollars.

Accepted Answer

A)  $0.2759 
B)  $0.82777 
C)  $1.82777 
D)  $2.48 
E)  None of thesE.$3 x 0.82777 = $2.48 
A)  $0.2759 
B)  $0.82777 
C)  $1.82777 
D)  $2.48 
E)  None of thesE.$3 x 0.82777 = $2.48

Question 18

A company owns 9% bonds with a par value of $100,000 that pay interest on October 1 and April 1. The amount of interest accrued on December 31 (the company's year-end) would be:

Accepted Answer

A)  $750. 
B)  $1,500. 
C)  $2,250. 
D)  $4,500. 
E)  $9,000. 
A)  $750. 
B)  $1,500. 
C)  $2,250. 
D)  $4,500. 
E)  $9,000.

Question 19

Investments in equity securities where the investor has a controlling influence are accounted for using the _______________________________.

Accepted Answer

Equity met

Question 20

If a U. S. company's credit sale to an international customer allows payment to be made in a foreign currency, the transaction is recorded using the exchange rate on the date of sale.

Accepted Answer

A) True 
 B)False

Exam 15: Investments and International Operations

Held-to-maturity securities are ____________ securities a company intends and is able to hold until maturity.

Debt securities are recorded at cost when purchased.

When using the equity method for investments in equity securities, the investor records the receipt of cash dividends as revenue.

Wiffery Company had the following trading securities in its portfolio at December 31. The Fair Value Adjustment - Trading account had a balance of zero prior to year-end adjustment. Prepare the appropriate adjusting journal entry.

Long-term investments in debt securities not classified as trading or held-to-maturity securities are classified as available-for-sale securities.

Chung owns 40% of Lu's common stock. Lu pays $97,000 in total cash dividends to its shareholders. Chung's entry to record this transaction should include a:

Long-term investments in available-for-sale securities are reported at their _______ on the balance sheet.

Profit margin is net sales divided by net income.

All of the following statements regarding equity securities are True except:

At acquisition, debt securities are:

Cash equivalents are investments that are readily converted to known amounts of cash and mature within three months.

A company has net income of $130,500. Its net sales were $1,740,000 and its average total assets were $2,750,000. Its profit margin equals 7.5%. Profit margin = $130,500/$1,740,000 = 7.5%

Investments in trading securities are accounted for using the equity method with consolidation.

When an investor company owns more than 25% of the voting stock of an investee company, it has a controlling influence.

If the exchange rate for Canadian and U.S. dollars is 0.82777 to 1, this implies that 3 Canadian dollars will buy ____ worth of U.S. dollars.

A company owns 9% bonds with a par value of $100,000 that pay interest on October 1 and April 1. The amount of interest accrued on December 31 (the company's year-end) would be:

Investments in equity securities where the investor has a controlling influence are accounted for using the _______________________________.

If a U. S. company's credit sale to an international customer allows payment to be made in a foreign currency, the transaction is recorded using the exchange rate on the date of sale.

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories and Cost of Sales

Accounting Information Systems

Cash and Internal Controls

Accounting for Receivables

Plant Assets, Natural Resources, and Intangibles

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Accounting for Corporations

Long-Term Liabilities

Reporting the Statement of Cash Flows

Analysis of Financial Statements

Managerial Accounting Concepts and Principles

Job Order Cost Accounting

Process Cost Accounting

Cost Allocation and Performance Measurement

Cost-Volume-Profit Analysis

Master Budgets and Planning

Flexible Budgets and Standard Costs

Capital Budgeting and Managerial Decisions

Time Value of Money

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