Exam 15: Investments and International Operations

A company has net income of $250,000, net sales of $2,000,000, and average total assets of $1,500,000. Its return on total assets equals:

On January 4, Year1, Larsen Company purchased 5,000 shares of Warner Company for $60,500. Warner Company has a total of 25,000 ordinary shares outstanding and it is presumed the Larsen Company will have a significant influence over Warner. During each of the next two years, Warner declared and paid cash dividends of $0.85 per share, and its net income was $72,000 and $67,000 for Year 1 and Year 2, respectively. The January 12, Year 3, entry to record the sale of 3,000 Warner Company's shares for $39,000 cash should be:

Breanna Boutique purchased on credit 50,000 worth of clothing from a British company when the exchange rate was $1.97 per British pound. At the year-end balance sheet date the exchange rate increased to $2.76. Breanna Boutique must record a:

On January 2, Froxel Company purchased 10,000 Sandia Corp. ordinary shares at $19 per share plus a $3,000 commission. This represents 30% of Sandia Corp.'s outstanding shares. On August 6, Sandia Corp. declared and paid cash dividends of $1.75 per share, and on December 31 it reported net income of $150,000. Prepare the necessary entries for Froxel to account for these transactions and events.

The cost method is used for long-term investments in equity securities with significant influence.

A U. S. Company's credit sale to an international customer allowing payment to be made in a foreign currency requires using the same exchange rate for the date of sale and the cash payment date.

A company reported net income for Year 1 of $98,000 and $106,000 for Year 2. It also reported net sales of $735,000 in Year 1 and $798,000 in Year 2. The company's average total assets in Year 1 were $1,850,000 and $1,720,000 in Year 2. Calculate the company's profit margin, total asset turnover and return on total assets for Year 1and Year 2. Comment on the results.

Foreign exchange rates fluctuate due to changing _______________ and ___________ conditions.

Morgan Company purchased 2,000 shares of Asta's ordinary shares for $143,000 as a long-term investment. The investment is classified as available-for-sale securities. The par value of the shares was $1 per share. The entry to record the transaction would include a:

If a U.S. company makes a credit sale to a foreign company, the sales price must be translated into dollars as of the date of ____________

Golden Age Co. exports Native American artwork to Japan. Prepare journal entries for the following transactions.

Held-to-maturity securities are:

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 total asset turnover equals 4.7%.

Accounting for long-term investments in equity securities with control uses the:

Micron owns 35% of Martok. Martok pays a total of $47,000 in cash dividends for the period. Micron's entry to record the dividend transaction would include a:

Investments in debt and equity securities that the company actively manages and trades for profit are referred to as short-term investments in:

There is fair value adjustment to the portfolio of held-to-maturity debt.

Consolidated statements are prepared as if a company is organized as one entity, with the amounts allocated for subsidiaries reported in the investment accounts.

Investments in equity securities where the investor has a significant influence, but not control, are accounted for using the _______________ method.

What is comprehensive income and how is it usually reported in the financial statements?