Exam 14: Investments in Debt and Equity Securities

Sanders Company began business in February of 2013.During the year,Sanders purchased the three trading securities listed below.On its December 31,2013,balance sheet,Sanders appropriately reported a $4,000 credit balance in its Market Adjustment--Trading Securities account.There was no change during 2014 in the composition of Sanders' portfolio of trading securities.Pertinent data are as follows: What amount of loss on these securities should be included in Sanders' income statement for the year ended December 31,2014?

On January 1,2014,Kimba Co.paid $500,000 for 20,000 shares of Flathead Co.'s common stock and classified these shares as trading securities.Kimba does not have the ability to exercise significant influence over Flathead.Flathead declared and paid a dividend of $.50 a share to its stockholders during 2014.Flathead reported net income of $260,000 for the year ended December 31,2014.The fair value of Flathead Co.'s stock at December 31,2014,is $27 per share.What is the net asset amount (which includes both investments and any related market adjustments)attributable to the investment in Flathead that will be included on Kimba's balance sheet at December 31,2014?

For which type of investments would unrealized increases and decreases be recorded directly in an owners' equity account?

Under the provisions of FASB ASC Topic 825 (Financial Instruments),

The following information relates to Bower Company's short-term investment in equity securities available for sale at the end of 2013 and 2014 (in 000s): Bower's net realized and unrealized gains and losses for 2014,respectively,would be

When an enterprise increases its interest in an investment in equity securities accounted for by the fair value method,and changes to the equity method,what is the initial carrying value for purposes of subsequent application of the equity method?

If an investment in stock is reclassified from available-for-sale securities to trading securities,the stock should be recorded on the date it is reclassified at the

On August 31,2014,Steinway Company purchased the following available-for-sale securities: On December 31,2014,Steinway reclassified its investment in security I from available-for-sale securities to trading securities.What total amount of loss on these securities should be included in Steinway' income statement for the year ended December 31,2014?

The equity method of accounting for an investment in the common stock of another company should be used when the investment

A credit balance in the account Market Adjustment--Trading Securities at the end of a year should be interpreted as the net

On January 1,2014,Sudan Company purchased investment securities costing $4,000 and classified them as trading securities.During 2014,Sudan Company sold a portion of these trading securities with a cost of $1,800 for $1,500.The market value of the remainder of these trading securities at December 31,2014,was $1,400.Sudan prepares its statement of cash flows using the indirect method. Which of the following represents the effect of these transactions on the statement of cash flows for Sudan Company for the year ending December 31,2014? Operating Activities Investing Activities

At the beginning of the year a company had a debit balance in the account Market Adjustment--Trading Securities.During the year the company did not buy or sell any trading securities,but at the end of the year the related market adjustment account had a credit balance.This change indicates that

On January 2,2013,Bismark Corporation bought 20 percent of Congeal Corporation's capital stock for $60,000 and classified it as available-for-sale securities.Congeal's net incomes for the years ended December 31,2013,and 2014,were $20,000 and $100,000,respectively.During 2014,Congeal declared a dividend of $110,000.No dividends were declared in 2013.On December 31,2014,the fair value of the Congeal stock owned by Bismark had increased to $90,000.How much should Bismark show on its 2014 income statement as income from this investment?

Which of the following is true regarding the provisions of International Accounting Standard No.39,"Financial Instruments: Recognition and Measurement (amended 2005)?

The following information is available for an enterprise's security investments as of December 31,2014: What is the 2014 holding gain or loss recognized in 2014 earnings and directly to stockholders' equity?

In March of 2013,Mars Corp.bought 45,000 shares of Elite Corp.'s listed stock for $450,000 and classified the shares as available-for-sale securities.The market value of these shares had declined to $300,000 by December 31,2013.Mars changed the classification of these shares to trading securities in June of 2014 when the market value of this investment in Elite's stock had risen to $345,000.How much should Mars include as a loss on transfer of securities in its determination of net income for 2014?

A debit balance in the account Market Adjustment--Available-for-Sale Securities at the end of a year should be interpreted as the net

An investor that uses the equity method of accounting for its investment in a 40 percent-owned investee that earned $50,000 and paid $8,000 in dividends,made the following entries: What effect will these entries have on the parent corporation's statement of financial position?

Cronie Enterprises purchased 10,000 shares of stock in Vector Corporation for $15 per share.Cronie's broker arranged for Cronie to pay only $4 cash per share at the date of purchase with the remaining balance to be paid in monthly installments. Cronie should record the investment by:

Which of the following is true?