Question 1

A decrease in the fair value of a security that has not yet been realized through an actual sale of the security is called a(n):

Accepted Answer

A)  Contingent loss. 
B)  Realizable loss. 
C)  Unrealized loss. 
D)  Capitalized loss. 
E)  Market loss. 
A)  Contingent loss. 
B)  Realizable loss. 
C)  Unrealized loss. 
D)  Capitalized loss. 
E)  Market loss.

Question 2

Long-term investments include investments in land or other assets not used in a company's operations.

Accepted Answer

A) True 
 B)False

Question 3

Savan Co. purchased 14,000 Briton Corporation's 40,000 ordinary shares 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 Briton Corporation's 40,000...

Question 4

Investments can be classified as:

Accepted Answer

A)  Held-for-trading securities. 
B)  Held-to-maturity debt securities. 
C)  Available-for-sale debt securities. 
D)  Available-for-sale equity securities. 
E)  All of these. 
A)  Held-for-trading securities. 
B)  Held-to-maturity debt securities. 
C)  Available-for-sale debt securities. 
D)  Available-for-sale equity securities. 
E)  All of these.

Question 5

Investments in held-for-trading securities are accounted for using the consolidation method.

Accepted Answer

A) True 
 B)False

Question 6

An investing company that owns more than ________ of another (investee) company's voting shares is presumed to have control over the investee.

Accepted Answer

The answer of An investing company that owns more than...

Question 7

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 8

Parris Corporation purchased 40% of Samitz Corporation for $100,000 on January 1. On November 17 of the same year, Samitz Corporation declared total cash dividends of $12,000. At year-end, Samitz Corporation reported net income of $60,000. The balance in the Parris Corporation's Long-Term Investment-Samitz account at December 31 should be:

Accepted Answer

A)  $80,800. 
B)  $100,000. 
C)  $95,200. 
D)  $119,200. 
E)  $124,000. 
A)  $80,800. 
B)  $100,000. 
C)  $95,200. 
D)  $119,200. 
E)  $124,000.

Question 9

A company had net income of $43,000, net sales of $380,500, and average total assets of $220,000. Its profit margin and total asset turnover were, respectively:

Accepted Answer

A)  11.3%; 1.73. 
B)  11.3%; 19.5. 
C)  1.7%; 19.5. 
D)  1.7%; 11.3. 
E)  19.5%; 11.3. 
A)  11.3%; 1.73. 
B)  11.3%; 19.5. 
C)  1.7%; 19.5. 
D)  1.7%; 11.3. 
E)  19.5%; 11.3.

Question 10

Brown Company sold supplies in the amount of 15,000 euros to a French company when the exchange rate was $1.15 per euro. At the time of payment, the exchange rate decreased to $1.12. Brown must record a loss of $450.

Accepted Answer

A) True 
 B)False

Question 11

Investments in held-to-maturity debt securities are always current assets.

Accepted Answer

A) True 
 B)False

Question 12

__________________________ are investments in securities that are not readily convertible to cash, or are not intended to be converted to cash in the short-term.

Accepted Answer

Long-term

Question 13

The currency in which a company presents its financial statements is known as the:

Accepted Answer

A)  Multinational currency. 
B)  Price-level-adjusted currency. 
C)  Specific currency. 
D)  Reporting currency. 
E)  Historical cost currency. 
A)  Multinational currency. 
B)  Price-level-adjusted currency. 
C)  Specific currency. 
D)  Reporting currency. 
E)  Historical cost currency.

Question 14

Held-for-trading securities are securities that are purchased by trading other securities rather than by paying cash.

Accepted Answer

A) True 
 B)False

Question 15

On November 12, Kera, Inc., a U.S. Company, sold merchandise on credit to Kakura of Japan at a price of 1,500,000 yen. The exchange rate was $0.00837 on the date of sale. On December 31, when Kera prepared its financial statements, the exchange rate was $0.00843. Kakura paid in full on January 12, when the exchange rate was $0.00861. On January 12, Kera should prepare the following journal entry:

Accepted Answer

A)  Debit Cash $12,915; credit Accounts Receivable-Kakura $12,555; credit Foreign Exchange Gain $360. 
B)  Debit Cash $12,555; debit Foreign Exchange Loss $360; credit Accounts Receivable-Kakura $12,915. 
C)  Debit Cash $12,915; credit Accounts Receivable-Kakura $12,645; credit Foreign Exchange Gain $90. 
D)  Debit Cash $12,645; debit Foreign Exchange Loss $90; credit Accounts Receivable-Kakura $12,915. 
E)  Debit Cash $12,915; credit Accounts Receivable-Kakura $12,645; credit Foreign Exchange Gain $270. 
A)  Debit Cash $12,915; credit Accounts Receivable-Kakura $12,555; credit Foreign Exchange Gain $360. 
B)  Debit Cash $12,555; debit Foreign Exchange Loss $360; credit Accounts Receivable-Kakura $12,915. 
C)  Debit Cash $12,915; credit Accounts Receivable-Kakura $12,645; credit Foreign Exchange Gain $90. 
D)  Debit Cash $12,645; debit Foreign Exchange Loss $90; credit Accounts Receivable-Kakura $12,915. 
E)  Debit Cash $12,915; credit Accounts Receivable-Kakura $12,645; credit Foreign Exchange Gain $270.

Question 16

A control over the investee is based on the investor owning voting shares exceeding:

Accepted Answer

A)  10%. 
B)  20%. 
C)  30%. 
D)  40%. 
E)  50%. 
A)  10%. 
B)  20%. 
C)  30%. 
D)  40%. 
E)  50%.

Question 17

Rosser Company sold supplies in the amount of 25,000 euros to a French company when the exchange rate was $1.21 per euro. At the time of payment, the exchange rate decreased to $0.82. Rosser must record a:

Accepted Answer

A)  gain of $9,750. 
B)  gain of $20,500. 
C)  loss of $9,750. 
D)  loss of $20,500. 
E)  neither a gain nor loss. 
A)  gain of $9,750. 
B)  gain of $20,500. 
C)  loss of $9,750. 
D)  loss of $20,500. 
E)  neither a gain nor loss.

Question 18

Schoodic Company had the following long-term available-for-sale securities in its portfolio at December 31 for each of the years listed. The year-end cost and fair values for its portfolio follow. Beginning with Year 1, prepare the appropriate journal entry to record each year-end market adjustment for these securities.

Accepted Answer

Year 1: $394,500 - $389,900 = $4,600 los

Question 19

The price of one currency stated in terms of another currency is called a(n):

Accepted Answer

A)  Foreign exchange rate. 
B)  Currency transaction. 
C)  Historical exchange rate. 
D)  International conversion rate. 
E)  Currency rate. 
A)  Foreign exchange rate. 
B)  Currency transaction. 
C)  Historical exchange rate. 
D)  International conversion rate. 
E)  Currency rate.

Question 20

On March 15, Carter Company purchased 10,000 Tonya Corp. shares for $35,000. The investment is classified as available-for-sale securities. On June 30, the shares had a fair value of $38,000. Carter should do all of the following except:

Accepted Answer

A)  Record an increase to the Fair value Adjustment-AFS account. 
B)  Record an increase to the Unrealized Gain - Equity account. 
C)  Report the increase in the equity section of the balance sheet. 
D)  Report the increase in the asset section of the balance sheet. 
E)  Record an increase to the Unrealized Gain - Income account. 
A)  Record an increase to the Fair value Adjustment-AFS account. 
B)  Record an increase to the Unrealized Gain - Equity account. 
C)  Report the increase in the equity section of the balance sheet. 
D)  Report the increase in the asset section of the balance sheet. 
E)  Record an increase to the Unrealized Gain - Income account.

Exam 15: Investments and International Operations

A decrease in the fair value of a security that has not yet been realized through an actual sale of the security is called a(n):

Long-term investments include investments in land or other assets not used in a company's operations.

Investments can be classified as:

Investments in held-for-trading securities are accounted for using the consolidation method.

An investing company that owns more than ________ of another (investee) company's voting shares is presumed to have control over the investee.

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

A company had net income of $43,000, net sales of $380,500, and average total assets of $220,000. Its profit margin and total asset turnover were, respectively:

Brown Company sold supplies in the amount of 15,000 euros to a French company when the exchange rate was $1.15 per euro. At the time of payment, the exchange rate decreased to $1.12. Brown must record a loss of $450.

Investments in held-to-maturity debt securities are always current assets.

__________________________ are investments in securities that are not readily convertible to cash, or are not intended to be converted to cash in the short-term.

The currency in which a company presents its financial statements is known as the:

Held-for-trading securities are securities that are purchased by trading other securities rather than by paying cash.

A control over the investee is based on the investor owning voting shares exceeding:

Rosser Company sold supplies in the amount of 25,000 euros to a French company when the exchange rate was $1.21 per euro. At the time of payment, the exchange rate decreased to $0.82. Rosser must record a:

The price of one currency stated in terms of another currency is called a(n):

On March 15, Carter Company purchased 10,000 Tonya Corp. shares for $35,000. The investment is classified as available-for-sale securities. On June 30, the shares had a fair value of $38,000. Carter should do all of the following except:

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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