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Exam 15: Investments and International Operations

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Question 51

Multiple Choice

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If the exchange rate for Canadian and U.S. dollars is 0.82777 to 1, this implies that 3 Canadian dollars will buy ________ worth of U.S. dollars.

A) $2.48
B) $0.2759
C) $0.82777
D) $1.00
E) $1.82777

F) None of the above
G) A) and B)

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Question 52

Multiple Choice

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Short-term investments in held-to-maturity debt securities are accounted for using the:

A) Fair value method with fair value adjustment to equity.
B) Cost method without amortization.
C) Cost method with amortization.
D) Equity method.
E) Fair value method with fair value adjustment to income.

F) B) and E)
G) C) and D)

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Question 53

Multiple Choice

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When a U.S. company makes a credit sale to an international customer and the sale terms are for payment in a foreign currency, the foreign exchange rate used to record the sale is the exchange rate:

A company received dividends of $0.35 per share on 300 shares of stock it holds as an investment. The journal entry to record this transaction would be to debit Cash for $105 and credit Dividend Revenue for $105.

All of the following are true about debt securities except:

Held-to-maturity securities are equity securities a company intends and is able to hold until maturity.

A company paid $37,800 plus a broker's fee of $525 to acquire 8% bonds with a $40,000 maturity value. The company intends to hold the bonds to maturity. The cash proceeds the company will receive when the bonds mature equal:

Long-term investments include investments in land or other assets not used in a company's operations.

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

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:

Kendall Corp. purchased at par value $75,000 of Shrem Company's 8% bonds that mature in three-years. The bonds pay interest semiannually on June 1 and December 1. Kendall plans to hold the bonds until they mature. When the bonds mature, Kendall should prepare the following journal entry:

The controlling investor is called the:

Strickland Corporation has invested in 10% of the outstanding stock of Nez Corporation. Strickland intends to actively manage this investment for profit. This investment is classified as:

Match the appropriate definitions with terms.

The investee company in a long term investment with controlling interest is called the:

Investments in held-to-maturity debt securities are always current assets.

A company had net income of $2,660,000, net sales of $25,000,000, and average total assets of $8,000,000. Its return on total assets equals:

Landmark Corp. buys $300,000 of Schroeter Company's 8%, 5-year bonds payable at par value on September 1. Interest payments are made semiannually. Landmark plans to hold the bonds for the 5-year life. The journal entry to record the purchase should include:

Cash equivalents are investments that are readily converted to known amounts of cash and mature within three months.

On March 15, Alan Company purchased 10,000 shares of Cameo Corp. stock for $35,000. The investment is classified as available-for-sale securities. This is the company's first and only investment in available-for-sale securities. On June 30, the stock had a fair value of $34,000. Alan should do which of the following: