Question 1

Long-term investments:

Accepted Answer

A)  Are current assets. 
B)  Include funds earmarked for a special purpose such as bond sinking funds. 
C)  Must be readily convertible to cash. 
D)  Are expected to be converted into cash within one year. 
E)  Include only equity securities. 
A)  Are current assets. 
B)  Include funds earmarked for a special purpose such as bond sinking funds. 
C)  Must be readily convertible to cash. 
D)  Are expected to be converted into cash within one year. 
E)  Include only equity securities.

Question 2

A company had net income of $450,000 in Year 1 and $620,000 in Year 2. The company had average total assets of $2,500,000 in Year 1 and $3,000,000 in Year 2. Calculate the return on total assets for Year 1and Year 2. Comment on the results, did the company's performance improve?

Accepted Answer

(a.) Year 1: $450,000/$2,500,000 = 18.0%

Question 3

Held-for-trading securities are always reported as current assets.

Accepted Answer

A) True 
 B)False

Question 4

On May 15, Briar Company purchased 10,000 shares of Broder Corp. for $80,000. The securities are considered available-for-sale securities. On September 30, the shares had a market value of $85,000. The $5,000 difference must be reported on the income statement as a $5,000 gain.

Accepted Answer

A) True 
 B)False

Question 5

If a long-term investment in an equity security gives the investor significant influence over the investee, the investment is classified as available-for-sale.

Accepted Answer

A) True 
 B)False

Question 6

Clark Corporation purchased 40% of IT Corporation for $125,000 on January 1. On May 20 of the same year, IT Corporation declared total cash dividends of $30,000. At year-end, IT Corporation reported net income of $150,000. The balance in Clark Corporation's Long-Term Investment-IT Corporation account as of December 31 should be:

Accepted Answer

A)  $77,000. 
B)  $125,000. 
C)  $173,000. 
D)  $197,000. 
E)  $370,000. 
A)  $77,000. 
B)  $125,000. 
C)  $173,000. 
D)  $197,000. 
E)  $370,000.

Question 7

When a credit sale is denominated in a foreign currency, the foreign exchange rate used to record the sale is the current exchange rate:

Accepted Answer

A)  Thirty days from the date of sale. 
B)  At the end of the seller's fiscal year. 
C)  At the end of the buyer's fiscal year. 
D)  On the date final payment is made. 
E)  On the date of the sale. 
A)  Thirty days from the date of sale. 
B)  At the end of the seller's fiscal year. 
C)  At the end of the buyer's fiscal year. 
D)  On the date final payment is made. 
E)  On the date of the sale.

Question 8

A company reported net income of $275,000, net sales of $2,500,000, and average total assets of $2,100,000 for the current year. Calculate this company's profit margin, total asset turnover, and return on total assets.

Accepted Answer

The answer of A company reported net income of $275,000,...

Question 9

Consolidated financial statements:

Accepted Answer

A)  Show the results of operations, cash flows, and the financial position of all entities under a parent's control. 
B)  Show the results of operations, cash flows, and the financial position of the parent only. 
C)  Show the results of operations, cash flows, and the financial position of the subsidiary only. 
D)  Include the investments account on the balance sheet. 
E)  Do not include a balance sheet. 
A)  Show the results of operations, cash flows, and the financial position of all entities under a parent's control. 
B)  Show the results of operations, cash flows, and the financial position of the parent only. 
C)  Show the results of operations, cash flows, and the financial position of the subsidiary only. 
D)  Include the investments account on the balance sheet. 
E)  Do not include a balance sheet.

Question 10

Define the foreign exchange rate between two currencies. Explain its effect on business transactions conducted in a foreign currency.

Accepted Answer

A foreign exchange rate is the price of

Question 11

Discuss the reasons companies make investments.

Accepted Answer

Companies make investments for several r

Question 12

Long-term investments are usually held as an investment of cash for use in current operations.

Accepted Answer

A) True 
 B)False

Question 13

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 14

A company had net income of $2,660,000, net sales of $25,000,000, and average total assets of $8,000,000. Its return on total assets equals:

Accepted Answer

A)  3.01%. 
B)  10.64%. 
C)  32.00%. 
D)  33.25%. 
E)  300.75%. 
A)  3.01%. 
B)  10.64%. 
C)  32.00%. 
D)  33.25%. 
E)  300.75%.

Question 15

On June 18, Johnson Company (a U.S. Company) sold merchandise to the Frater Company of Denmark for 60,000 Euros, with a payment due in 60 days. If the exchange rate was $1.14 per euro on the date of sale and $1.35 per euro on the date of payment, Johnson Company should recognize a foreign exchange gain or loss in the amount of:

Accepted Answer

A)  $60,000 gain. 
B)  $60,000 loss. 
C)  $68,400 loss. 
D)  $12,600 gain. 
E)  $12,600 loss. 
A)  $60,000 gain. 
B)  $60,000 loss. 
C)  $68,400 loss. 
D)  $12,600 gain. 
E)  $12,600 loss.

Question 16

Seamark buys $300,000 of Eider's 8% five-year bonds payable at par value. Interest payments are made semiannually. All of the following regarding accounting for the securities are EXCEPT:

Accepted Answer

A)  The debt securities should be recorded at the cost $300,000. 
B)  The securities will have a maturity value of $300,000. 
C)  The semiannual interest payment amount is $12,000. 
D)  The semiannual interest payment amount is $24,000. 
E)  Interest Revenue should be credited when an interest payment is received. 
A)  The debt securities should be recorded at the cost $300,000. 
B)  The securities will have a maturity value of $300,000. 
C)  The semiannual interest payment amount is $12,000. 
D)  The semiannual interest payment amount is $24,000. 
E)  Interest Revenue should be credited when an interest payment is received.

Question 17

Equity securities reflect a creditor relationship such as investments in notes and bonds.

Accepted Answer

A) True 
 B)False

Question 18

Everrine Corporation owns 30% of JRW Corporation. Everrine Corporation received $9,000 in cash dividends from JRW Corporation. The entry to record receipt of these dividends is:

Accepted Answer

A)  Debit Cash, $9,000; credit Long-Term Investments, $9,000. 
B)  Debt Long-Term Investment, $9,000; credit Cash, $9000. 
C)  Debit Cash, $9,000; credit Interest Revenue, $9,000. 
D)  Debit Unrealized Gain-Equity, $9,000; credit Cash, $9,000. 
E)  Debit Cash, $9,000; credit Dividend Revenue, $9,000. 
A)  Debit Cash, $9,000; credit Long-Term Investments, $9,000. 
B)  Debt Long-Term Investment, $9,000; credit Cash, $9000. 
C)  Debit Cash, $9,000; credit Interest Revenue, $9,000. 
D)  Debit Unrealized Gain-Equity, $9,000; credit Cash, $9,000. 
E)  Debit Cash, $9,000; credit Dividend Revenue, $9,000.

Question 19

Return on total assets can be separated into the profit margin ratio and total asset turnover.

Accepted Answer

A) True 
 B)False

Question 20

Long-term investments can include:

Accepted Answer

A)  Held-to-maturity debt securities. 
B)  Available-for-sale debt securities. 
C)  Available-for-sale equity securities. 
D)  Equity securities giving an investor significant influence over an investee. 
E)  All of these. 
A)  Held-to-maturity debt securities. 
B)  Available-for-sale debt securities. 
C)  Available-for-sale equity securities. 
D)  Equity securities giving an investor significant influence over an investee. 
E)  All of these.

Exam 15: Investments and International Operations

Long-term investments:

A company had net income of $450,000 in Year 1 and $620,000 in Year 2. The company had average total assets of $2,500,000 in Year 1 and $3,000,000 in Year 2. Calculate the return on total assets for Year 1and Year 2. Comment on the results, did the company's performance improve?

Held-for-trading securities are always reported as current assets.

On May 15, Briar Company purchased 10,000 shares of Broder Corp. for $80,000. The securities are considered available-for-sale securities. On September 30, the shares had a market value of $85,000. The $5,000 difference must be reported on the income statement as a $5,000 gain.

If a long-term investment in an equity security gives the investor significant influence over the investee, the investment is classified as available-for-sale.

When a credit sale is denominated in a foreign currency, the foreign exchange rate used to record the sale is the current exchange rate:

A company reported net income of $275,000, net sales of $2,500,000, and average total assets of $2,100,000 for the current year. Calculate this company's profit margin, total asset turnover, and return on total assets.

Consolidated financial statements:

Define the foreign exchange rate between two currencies. Explain its effect on business transactions conducted in a foreign currency.

Discuss the reasons companies make investments.

Long-term investments are usually held as an investment of cash for use in current operations.

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

A company had net income of $2,660,000, net sales of $25,000,000, and average total assets of $8,000,000. Its return on total assets equals:

Seamark buys $300,000 of Eider's 8% five-year bonds payable at par value. Interest payments are made semiannually. All of the following regarding accounting for the securities are EXCEPT:

Equity securities reflect a creditor relationship such as investments in notes and bonds.

Everrine Corporation owns 30% of JRW Corporation. Everrine Corporation received $9,000 in cash dividends from JRW Corporation. The entry to record receipt of these dividends is:

Return on total assets can be separated into the profit margin ratio and total asset turnover.

Long-term investments can include:

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

Long-Term Assets

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Accounting for Corporations

Long-Term Liabilities

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

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