Question 1

Halam Company had the following transactions relating to investments in trading securities during the year. Prepare the required general journal entries for these transactions.

Accepted Answer

The answer of Halam Company had the following transactions relating...

Question 2

Comprehensive income refers to all changes in equity during a period except those from owners' investments and dividends.

Accepted Answer

A) True 
 B)False

Question 3

Texana Inc. imports inventory from Mexico. Prepare the journal entries for Texana to record the following transactions. Include any year-end adjustments.

Accepted Answer

The answer of Texana Inc. imports inventory from Mexico. Prepare...

Question 4

Investments can be classified as:

Accepted Answer

A)  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

A company had a profit margin of 10.5% and total asset turnover of 1.84. Its return on total assets was:

Accepted Answer

A)  5.71% 
B)  8.66% 
C)  12.34% 
D)  13.61% 
E)  19.32%

Question 6

On January 2, Froxel Company purchased 10,000 shares of Sandia Corp. common stock at $19 per share plus a $3,000 commission. This represents 30% of Sandia Corp.'s outstanding stock. 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.

Accepted Answer

The answer of On January 2, Froxel Company purchased 10,000...

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

On February 15, Seacroft buys 7,000 shares of Kebo common at $28.53 per share plus a brokerage fee of $400. The stock is classified as available-for-sale securities. On March 15, Kebo declares a dividend of $1.15 per share payable to stockholders of record on April 15. Seacroft received the dividend on April 15 and ultimately sells half of the Kebo stock on November 17 of the current year for $29.30 per share less a brokerage fee of $250. The fair value of the remaining shares is $29.50 per share. The amount that Seacroft should report in the equity section of its year-end December 31 balance sheet for its investment in Kebo is:

Accepted Answer

A)  $10,295. 
B)  $8,050. 
C)  $2,245. 
D)  $3,195. 
E)  $6,390.

Question 9

On February 15, Seacroft buys 7,000 shares of Kebo common stock at $28.53 per share plus a brokerage fee of $400. The stock is classified as available-for-sale securities. On March 15, Kebo declares a dividend of $1.15 per share payable to stockholders of record on April 15. Seacroft received the dividend on April 15 and ultimately sells half of the Kebo stock on November 17 of the current year for $29.30 per share less a brokerage fee of $250. The journal entry to record the dividend on April 15 is:

Accepted Answer

A)  Debit Cash $7,350; credit Dividend Revenue $7,350. 
B)  Debit Cash $8,050; credit Dividend Revenue $8,050. 
C)  Debit Cash $8,050; credit Interest Revenue $8,050. 
D)  Debit Cash $7,350; credit Interest Revenue $7,350. 
E)  Debit Cash $8,050; credit Gain on Sale of Investments $8,050.

Question 10

Bond sinking funds are examples of short-term investments.

Accepted Answer

A) True 
 B)False

Question 11

The price of one currency stated in terms of another currency is called a foreign exchange rate.

Accepted Answer

A) True 
 B)False

Question 12

Explain how equity securities having significant influence are accounted for and reported in the financial statements. Include a discussion of the criterion for these securities in terms of an investee's voting stock.

Accepted Answer

The answer of Explain how equity securities having significant influence...

Question 13

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:

Accepted Answer

A)  Debit Sales $90; credit Foreign Exchange Gain $90. 
B)  Debit Foreign Exchange Loss $90; credit Sales $90. 
C)  Debit Accounts Receivable-Nakakura Company $90; credit Foreign Exchange Gain $90. 
D)  Debit Foreign Exchange Loss $90; Accounts Receivable-Nakakura Company $90. 
E)  No journal entry is required until the amount is collecteD.

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

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

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

The answer of Return on total assets is computed by...

Question 17

A company purchased $60,000 of 5% bonds on May 1 at par value. The bonds pay interest on February 1 and August 1. The amount of interest accrued on December 31 (the company's year-end) would be:

Accepted Answer

A)  $250. 
B)  $500. 
C)  $1,250. 
D)  $2,500. 
E)  $3,000.

Question 18

All of the following statements regarding accounting for trading securities under U.S. GAAP are True except:

Accepted Answer

A)  The entire portfolio of trading securities is reported at is fair value. 
B)  An unrealized gain or loss from a change in fair value is reported on the income statement. 
C)  A realized gain or loss is recorded when the securities are sold and reported on the income statement. 
D)  When the period-end fair value adjustment for the portfolio of trading securities is computed, it includes the cost and fair value of any securities sold. 
E)  When the period-end fair value adjustment for the portfolio of trading securities is computed, it excludes the cost and fair value of any securities sold.

Question 19

Foreign exchange rates fluctuate due to changes in:

Accepted Answer

A)  Political conditions. 
B)  Economic conditions. 
C)  Supply and demand for currencies. 
D)  Expectations of future events. 
E)  All of these.

Question 20

Explain the difference between short-term and long-term investments. Cite examples of each.

Accepted Answer

The answer of Explain the difference between short-term and long-term...

Exam 15: Investments and International Operations

Halam Company had the following transactions relating to investments in trading securities during the year. Prepare the required general journal entries for these transactions.

Comprehensive income refers to all changes in equity during a period except those from owners' investments and dividends.

Texana Inc. imports inventory from Mexico. Prepare the journal entries for Texana to record the following transactions. Include any year-end adjustments.

Investments can be classified as:

A company had a profit margin of 10.5% and total asset turnover of 1.84. Its return on total assets was:

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

Bond sinking funds are examples of short-term investments.

The price of one currency stated in terms of another currency is called a foreign exchange rate.

Explain how equity securities having significant influence are accounted for and reported in the financial statements. Include a discussion of the criterion for these securities in terms of an investee's voting stock.

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

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

Return on total assets is computed by dividing ___ by _.

A company purchased $60,000 of 5% bonds on May 1 at par value. The bonds pay interest on February 1 and August 1. The amount of interest accrued on December 31 (the company's year-end) would be:

All of the following statements regarding accounting for trading securities under U.S. GAAP are True except:

Foreign exchange rates fluctuate due to changes in:

Explain the difference between short-term and long-term investments. Cite examples of each.