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Exam 26: Investments

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Question 81

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________ are debt securities that a company intends to actively manage and trade for a profit.

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Question 82

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On February 15,Jewel Company buys 7,000 shares of Marcelo Corp.at $28.53 per share.The stock is classified as a stock investment with insignificant influence.This is the company's first and only stock investment.On March 15,Marcelo Corp.declares a dividend of $1.15 per share payable to stockholders of record on April 15.Jewel Company received the dividend on April 15 and ultimately sells half of the Marcelo Corp.stock on November 17 of the current year for $29.30 per share. -The fair value of the remaining 3,500 shares is $29.50 per share.The amount that Jewel Company should report in the asset section of its year-end December 31 balance sheet for its investment in Marcelo Corp.is:

A) $200,110.
B) $103,250.
C) $2,245.
D) $3,195.
E) $5,440.

F) A) and E)
G) A) and B)

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Question 83

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Canberry Corporation had net income of $80,000,beginning total assets of $640,000 and ending total assets of $580,000.Its return on total assets is:

On February 15,Jewel Company buys notes of Marcelo Corp.for $200,110.The investment is classified as long-term available-for-sale securities.This is the company's first and only investment in available-for-sale securities.The journal entry to record the purchase on February 15 is:

Accounting for long-term investments in equity securities with controlling influence uses the:

Land used in the company's operations is reported as a long-term investment.

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

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

On February 15,Jewel Company buys 7,000 shares of Marcelo Corp.common stock at $28.53 per share.The stock is classified as a stock investment with insignificant influence.This is the company's first and only stock investment.On March 15,Marcelo Corp.declares a dividend of $1.15 per share payable to stockholders of record on April 15.Jewel Company received the dividend on April 15 and ultimately sells half of the Marcelo Corp.stock on November 17 of the current year for $29.30 per share.The journal entry to record the sale of the 3,500 shares of stock on November 17 is:

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:

A company had net income of $43,000,net sales of $380,500,and average total assets of $220,000.Its profit margin and total asset turnover were,respectively:

The account,Fair Value Adjustment-Available-for-Sale,is reported as an adjunct asset on the balance sheet.

A company had net income of $86,000 in Year 1 and $118,000 in Year 2.Its net sales were $640,000 in Year 1 and $611,000 in Year 2.Its average total assets in Year 1 were $1,670,000 and $1,712,000 in Year 2.Calculate the profit margin,total asset turnover and return on total assets for both years.Comment on the results.

If a company has a controlling influence over another company,the controlling investor is called the parent,and the investee company is called the subsidiary.

A company has net income of $250,000,net sales of $2,000,000,and average total assets of $1,500,000.Its return on total assets equals:

In the current year,Largo Co.purchased bonds of MacDermott Corp.with a cost of $125,000 and a year-end fair value of $127,000.These are classified as long-term available-for-sale debt securities.Prepare the journal entry to record any necessary fair value adjustment to the debt investments as of December 31.

Rainier Importers purchases automotive parts from Austria.Prepare journal entries for the following transactions of Rainier.

When a stock investment with insignificant influence is sold,the sale proceeds are compared with the cost,and if the cost is greater than the proceeds,a gain on the sale of the security is recorded.

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

Scotsland Company had the following transactions relating to stock investments with insignificant influence during the year.Prepare the required journal entries for these transactions.