Question 1

Chung owns 40% of Lu's ordinary shares. Lu pays $97,000 in total cash dividends to its shareholders. Chung's entry to record this transaction should include a:

Accepted Answer

A)  Debit to Dividends for $97,000. 
B)  Debit to Dividends for $38,800. 
C)  Debit to Long-Term investments for $97,000. 
D)  Credit to Long-Term Investments for $38,800. 
E)  Credit to Cash for $97,000.

Question 2

All of the following statements regarding equity securities are except:

Accepted Answer

A)  Equity securities should be recorded at cost when acquired. 
B)  Equity securities are valued at fair value if classified as hedl-for-trading securities. 
C)  Equity securities are valued at fair value if classified as significant influence securities. 
D)  Equity securities are valued at fair value if classified as available-for-sale securities. 
E)  Equity securities classified as available-for-sale record the dividend revenue when received.

Question 3

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 shares.

Accepted Answer

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

Question 4

Explain how available-for-sale securities are accounted for at and after acquisition and how they are reported in financial statements.

Accepted Answer

The answer of Explain how available-for-sale securities are accounted for...

Question 5

Short-term investments are intended to be converted into cash within the longer of one year or the current operating cycle of the business, and are readily convertible to cash.

Accepted Answer

A) True 
 B)False

Question 6

Six months ago, a company purchased an investment in shares for $65,000. The investment is classified as available-for-sale securities. The current fair value of the shares is $68,500. The company should record a:

Accepted Answer

A)  Debit to Gain on Investment for $3,500. 
B)  Credit to Gain on Investment for $3,500. 
C)  Debit to Investment Revenue for $3,500. 
D)  Credit to Share Capital-Ordinary for $3,500. 
E)  Credit to Investment Revenue for $3,500.

Question 7

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 8

Seamark buys $300,000 of Eider's 8% five-year bonds payable at par value. Interest payments are made semiannually. Seamark plans to hold the bonds for the five year life. The journal entry to record the purchase should include:

Accepted Answer

A)  A debit to Long-Term Investments-AFS $300,000. 
B)  A debit to Short-Term Investments-Trading $300,000. 
C)  A debit to Long-Term Investments-HTM $300,000. 
D)  A debit to Short-Term Investments-AFS $300,000. 
E)  A debit to Cash $300,000.

Question 9

Vans purchased 40,000 shares of Skechs ordinary shares for $232,000. This represents 40% of the outstanding shares. The entry to record the transaction includes a:

Accepted Answer

A)  Debit to Long-Term Investments for $92,800. 
B)  Debit to Long-Term Investments for $232,000. 
C)  Credit to Long-Term Investments for $92,800. 
D)  Debit to Long-Term Investments-HTM for $232,000. 
E)  Debit to Short-Term Investment-AFS for $232,000.

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

Available-for-sale equity securities:

Accepted Answer

A)  Are recorded at cost when acquired. 
B)  May earn dividends that are reported in that year's income statement. 
C)  May be classified as either short-term or long-term securities. 
D)  Are reported at market value on the balance sheet. 
E)  All of these.

Question 12

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 13

________________________ refers to all changes in equity for a period except for those due to owners' investments and dividends to owners.

Accepted Answer

The answer of ________________________ refers to all changes in equity...

Question 14

Match the following terms with the appropriate definitions.

Accepted Answer

The answer of Match the following terms with the appropriate...

Question 15

If the exchange rate for Canadian and U.S. dollars is 0.7382 to 1, this implies that 2 Canadian dollars will buy about1.48 worth of U.S. dollars.

Accepted Answer

A) True 
 B)False

Question 16

If a U. S. company's credit sale to an international customer allows payment to be made in a foreign currency, the transaction is recorded using the exchange rate on the date of sale.

Accepted Answer

A) True 
 B)False

Question 17

Multinational corporations can be U.S. companies with operations in other countries.

Accepted Answer

A) True 
 B)False

Question 18

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 19

Doherty Corporation had net income of $30,000, net sales of $1,000,000, and average total assets of $500,000. Its return on total assets is:

Accepted Answer

A)  3% 
B)  200% 
C)  6% 
D)  17% 
E)  1.5%

Question 20

On July 31, Beatrice Co. purchased 2,000 shares of SimmTech shares for $16,000. The investment is classified as available-for-sale securities. On October 31, which is Beatrice's year-end, the shares had a fair value of $20,000. Beatrice should record a:

Accepted Answer

A)  Credit to Gain on Investment for $4,000. 
B)  Credit to Share Capital-Ordinary for $4,000. 
C)  Credit to Investment Revenue for $4,000. 
D)  Debit to Investment Revenue for $4,000. 
E)  Debit to Gain on Investment for $4,000.

Exam 15: Investments and International Operations

Chung owns 40% of Lu's ordinary shares. Lu pays $97,000 in total cash dividends to its shareholders. Chung's entry to record this transaction should include a:

All of the following statements regarding equity securities are except:

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 shares.

Explain how available-for-sale securities are accounted for at and after acquisition and how they are reported in financial statements.

Short-term investments are intended to be converted into cash within the longer of one year or the current operating cycle of the business, and are readily convertible to cash.

Six months ago, a company purchased an investment in shares for $65,000. The investment is classified as available-for-sale securities. The current fair value of the shares is $68,500. The company should record a:

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

Seamark buys $300,000 of Eider's 8% five-year bonds payable at par value. Interest payments are made semiannually. Seamark plans to hold the bonds for the five year life. The journal entry to record the purchase should include:

Vans purchased 40,000 shares of Skechs ordinary shares for $232,000. This represents 40% of the outstanding shares. The entry to record the transaction includes a:

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

Available-for-sale equity securities:

Foreign exchange rates fluctuate due to changes in:

________________________ refers to all changes in equity for a period except for those due to owners' investments and dividends to owners.

Match the following terms with the appropriate definitions.

If the exchange rate for Canadian and U.S. dollars is 0.7382 to 1, this implies that 2 Canadian dollars will buy about1.48 worth of U.S. dollars.

If a U. S. company's credit sale to an international customer allows payment to be made in a foreign currency, the transaction is recorded using the exchange rate on the date of sale.

Multinational corporations can be U.S. companies with operations in other countries.

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

Doherty Corporation had net income of $30,000, net sales of $1,000,000, and average total assets of $500,000. Its return on total assets is:

On July 31, Beatrice Co. purchased 2,000 shares of SimmTech shares for $16,000. The investment is classified as available-for-sale securities. On October 31, which is Beatrice's year-end, the shares had a fair value of $20,000. Beatrice should record a: