Question 1

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 2

Long-term investments can include funds earmarked for special purposes such as bond sinking funds.

Accepted Answer

A) True 
 B)False

Question 3

Hamilton Company owns 51,000 of Hennie Company's 100,000 ordinary shares. Hennie Company pays $25,000 in total cash dividends to its shareholders. Hamilton's entry to record this transaction should include a:

Accepted Answer

A)  Debit to Dividend Revenue for $12,750. 
B)  Debit to Interest Revenue for $12,750. 
C)  Credit to Long-Term investments for $12,750. 
D)  Credit to Long-Term Investments for $25,000. 
E)  Credit to Dividend Revenue for $25,000. 
A)  Debit to Dividend Revenue for $12,750. 
B)  Debit to Interest Revenue for $12,750. 
C)  Credit to Long-Term investments for $12,750. 
D)  Credit to Long-Term Investments for $25,000. 
E)  Credit to Dividend Revenue for $25,000.

Question 4

Profit margin is net sales divided by net income.

Accepted Answer

A) True 
 B)False

Question 5

Investments in equity securities where the investor has control are accounted for using the _______________________________.

Accepted Answer

Consolidat

Question 6

An investor presumed to have significant influence owns as least 20% but not more than 50% of another company's voting shares.

Accepted Answer

A) True 
 B)False

Question 7

Sanuk purchased on credit F1F1F1S1F1F1F1020,000 worth of parts from a British company when the exchange rate was F1F1F1S1F1F1F101.66 per British pound. At the year-end balance sheet date the exchange rate increased to $1.69. Sanuk must record a gain of $600.

Accepted Answer

A) True 
 B)False

Question 8

When using the equity method, receipt of cash dividends increases the carrying amount (book value) of an investment in equity securities.

Accepted Answer

A) True 
 B)False

Question 9

The controlling investor is called the:

Accepted Answer

A)  Owner. 
B)  Subsidiary. 
C)  Parent. 
D)  Investee. 
E)  Senior entity. 
A)  Owner. 
B)  Subsidiary. 
C)  Parent. 
D)  Investee. 
E)  Senior entity.

Question 10

Debt securities are recorded at cost when purchased, and interest revenue for investments in debt securities is recorded when earned.

Accepted Answer

A) True 
 B)False

Question 11

All of the following statements relating to accounting for international operations are except:

Accepted Answer

A)  Foreign exchange gains or losses can occur when accounting for international sales transactions. 
B)  Gains and losses from foreign exchange transactions are accumulated in the Fair Value Adjustment Account and are reported on the balance sheet. 
C)  Gains and losses from foreign exchange transactions are accumulated in the Foreign Exchange Gain (or Loss) account. 
D)  The balance in the Foreign Exchange Gain (or Loss) account is reported on the income statement. 
E)  Foreign exchange gains or losses can occur when accounting for international purchases transactions. 
A)  Foreign exchange gains or losses can occur when accounting for international sales transactions. 
B)  Gains and losses from foreign exchange transactions are accumulated in the Fair Value Adjustment Account and are reported on the balance sheet. 
C)  Gains and losses from foreign exchange transactions are accumulated in the Foreign Exchange Gain (or Loss) account. 
D)  The balance in the Foreign Exchange Gain (or Loss) account is reported on the income statement. 
E)  Foreign exchange gains or losses can occur when accounting for international purchases transactions.

Question 12

Management's intent determines whether an available-for-sale security is classified as long-term or short-term.

Accepted Answer

A) True 
 B)False

Question 13

On January 1, 2011, Freder Corporation purchased 7,500 shares of SportTech as a long-term investment for a total of $235,000. The 7,500 shares represent 30% of the outstanding (25,000) shares of SportTech. Prepare the journal entries for Freder to record the following transactions and events:

Accepted Answer

The answer of On January 1, 2011, Freder Corporation purchased...

Question 14

Rhone Importers purchases automotive parts from Germany. Prepare journal entries for the following transactions of Rhone.

Accepted Answer

The answer of Rhone Importers purchases automotive parts from Germany....

Question 15

A U.S. company makes a sale to a foreign customer payable in 30 days in the customer's currency. The sale would be recorded by the U.S. company on the date:

Accepted Answer

A)  Of sale using a projected estimate of the U.S. dollar value at payment date. 
B)  Of sale using a 30-day average U.S. dollar value. 
C)  Of sale using the current dollar value. 
D)  Of sale using the foreign currency value. 
E)  When payment is received. 
A)  Of sale using a projected estimate of the U.S. dollar value at payment date. 
B)  Of sale using a 30-day average U.S. dollar value. 
C)  Of sale using the current dollar value. 
D)  Of sale using the foreign currency value. 
E)  When payment is received.

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

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%.

Accepted Answer

A) True 
 B)False

Question 18

Comprehensive income includes

Accepted Answer

A)  Revenues and expenses reported in the income statement. 
B)  Gains and losses reported in the income statement. 
C)  Unrealized gains and losses on long-term available-for-sale securities. 
D)  All changes in equity for a period except those due to investments and distributions to owners. 
E)  All of these. 
A)  Revenues and expenses reported in the income statement. 
B)  Gains and losses reported in the income statement. 
C)  Unrealized gains and losses on long-term available-for-sale securities. 
D)  All changes in equity for a period except those due to investments and distributions to owners. 
E)  All of these.

Question 19

If a company owns more than 20% of the shares of another company and these shares are being held as a long-term investment, which method would the investor normally use to account for this investment?

Accepted Answer

A)  Equity method. 
B)  Fair value method. 
C)  Historical cost method. 
D)  Cost with amortization method. 
E)  Effective method. 
A)  Equity method. 
B)  Fair value method. 
C)  Historical cost method. 
D)  Cost with amortization method. 
E)  Effective method.

Question 20

_________________________ securities reflect a creditor relationship while ____________________ securities reflect an owner relationship.

Accepted Answer

The answer of _________________________ securities reflect a creditor relationship while...

Exam 15: Investments and International Operations

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

Long-term investments can include funds earmarked for special purposes such as bond sinking funds.

Hamilton Company owns 51,000 of Hennie Company's 100,000 ordinary shares. Hennie Company pays $25,000 in total cash dividends to its shareholders. Hamilton's entry to record this transaction should include a:

Profit margin is net sales divided by net income.

Investments in equity securities where the investor has control are accounted for using the _______________________________.

An investor presumed to have significant influence owns as least 20% but not more than 50% of another company's voting shares.

Sanuk purchased on credit 20,000 worth of parts from a British company when the exchange rate was 1.66 per British pound. At the year-end balance sheet date the exchange rate increased to $1.69. Sanuk must record a gain of $600.

When using the equity method, receipt of cash dividends increases the carrying amount (book value) of an investment in equity securities.

The controlling investor is called the:

Debt securities are recorded at cost when purchased, and interest revenue for investments in debt securities is recorded when earned.

All of the following statements relating to accounting for international operations are except:

Management's intent determines whether an available-for-sale security is classified as long-term or short-term.

On January 1, 2011, Freder Corporation purchased 7,500 shares of SportTech as a long-term investment for a total of $235,000. The 7,500 shares represent 30% of the outstanding (25,000) shares of SportTech. Prepare the journal entries for Freder to record the following transactions and events:

Rhone Importers purchases automotive parts from Germany. Prepare journal entries for the following transactions of Rhone.

A U.S. company makes a sale to a foreign customer payable in 30 days in the customer's currency. The sale would be recorded by the U.S. company on the date:

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

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%.

Comprehensive income includes

If a company owns more than 20% of the shares of another company and these shares are being held as a long-term investment, which method would the investor normally use to account for this investment?

_________________________ securities reflect a creditor relationship while ____________________ securities reflect an owner relationship.

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

Filters

_____ securities reflect a creditor relationship while securities reflect an owner relationship.