Exam 15: Investments and International Operations

A company had net income of $45,000, net sales of $390,000, and average total assets of $250,000 for the current year. Calculate the company's profit margin, total asset turnover, and return on total assets.

Debt securities are recorded at cost when purchased.

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

Foreign exchange rates fluctuate due to many factors including changing political and economic conditions.

An investing company that owns _________ of another (investee) company's voting shares (but not more than 50%) is presumed to have a significant influence over the investee.

A company holds $40,000 of 7% bonds as a held-to-maturity security. Assuming all prior interest entries have been accounted for, the bondholder's journal entry to record receipt of the semiannual interest payment includes a debit to Cash for $2,800 and a credit to Interest Revenue for $2,800.

Kramer Corporation had the following long-term investment transactions. Prepare the journal entries Kramer Corporation should record for these transactions and events.

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

Short-term investments:

A company had net income of $40,000, net sales of $300,000, and average total assets of $200,000. Its profit margin and total asset turnover were respectively:

Micron owns 30% of JVT shares. Micron received $6,500 in cash dividends from its investment in JVT. The entry to record receipt of these dividends includes a debit to Cash for $6,500 and a credit to Long-Term Investments for $6,500.

On April 1 of the current year, a company paid $150,000 cash to purchase 7%, 10-year bonds with a par value of $150,000; interest is paid semiannually each April 1 and October 1. The company intends to hold these bonds until they mature. Prepare the journal entries to record the bond purchase, the receipt of the first semiannual interest payment on October 1 of the current year, and the accrual of interest for the year-end December 31.

Select the correct statement from the following:

Wiffery Company started business in the current year and had the following held-for-trading securities in its portfolio at December 31. Prepare the separate journal entries to record unrealized gains or losses for each investment.

Return on total assets is computed by dividing ___________ by _________.

Consolidated financial statements show the financial position, results of operations, and cash flows of all entities under the parent's control.