FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 15:Investments

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 41

Multiple Choice

Review LaterAdd Note

Review Later

Held-to-maturity securities

A) are reported at fair value
B) include stocks as well as bonds
C) may be reported as current or noncurrent assets
D) all of these

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

Correct Answer

verified

Show Answer

Question 42

True/False

Review LaterAdd Note

Review Later

When a bond is purchased for an investment, the purchase price, minus the brokerage commission, plus any accrued interest is recorded.

A) True
B) False

Correct Answer

verified

Show Answer

Question 43

Multiple Choice

Review LaterAdd Note

Changes in the value of available-for-sale securities

The investor carrying an investment by the equity method records cash dividends received as an increase in the carrying amount of the investment.

GAAP requires trading and available-for-sale investments to be reported

It is not possible for one company to influence the operating policies of another company unless it owns more than 50% interest in that company.

An equity investment in less than 20% of another company's stock is accounted for using the fair value method.

Prepare the journal entries for the following transactions for Batson Co. (a) Batson Co. purchased 1,200 shares of the total of 100,000 outstanding shares of Michael Corp. stock for $\$ 20.75$ per share plus a $\$ 70$ commission. (b) Michael's total earnings for the period are $\$ 84,000$ . (c) Michael's paid a total of $\$ 40,000$ in cash dividends to sharehol ders of record.

On March 1, Year 1, Chase Inc. purchases 35% of the outstanding shares of Glory Corporation stock for $325,000. On December 31, Year 1, Glory reports net income of $162,000. On January 15, Year 2, Glory pays total dividends to stockholders of $33,000. Journalize the three transactions.

Ruben Company purchased $100,000 of Evans Company bonds at 100 plus $1,500 in accrued interest. The bond interest rate is 8% and interest is paid semiannually. The journal entry to record the purchase would be

Ruben Company purchased $100,000 of Evans Company bonds at 100. Ruben later sold the bonds at $104,500 plus $500 in accrued interest. The journal entry to record the sale of the bonds would be

On January 2, Todd Company acquired 40% of the outstanding stock of McGuire Company for $205,000. For the year ending December 31. McGuire earned income of $48,000 and paid dividends of $14,000. ​ Prepare the entries for Todd Company for the purchase of the stock, share of McGuire income, and dividends received from McGuire.

During the first year of operations, Makala Company purchased two trading investments as follows: ​ $\begin{array}{|l|c|r|}\hline \text { Security } & \text { Shares Purchased } &{\text { Cost }} \\\hline \text { Oceanna Company } & 700 & \$ 29,000 \\\hline \text { Rockledge, Inc. } & 1,900 & 41,000 \\\hline\end{array}$ ​ Assume that as of December 31, the Oceanna Company stock had a market value of $49 per share and Rockledge, Inc. stock had a market value of $20 per share. Makala had 10,000 shares of no-par stock outstanding that was issued for $150,000. For the year ending December 31, Makala had net income of $105,000. No dividends were paid. ​ (a) Frepare the current assets section of the balance sheet presentation for the trading securities as of December 31. (b) Explain how the gain or loss would be reported on the income statement. ​

Trading securities are

On January 1, the Valuation Allowance for Trading Investments account has a zero balance. On December 31, the cost of trading securities portfolio was $64,200, and the fair value was $67,000. ​ Prepare the December 31 adjusting journal entry to record the unrealized gain or loss on trading investments.

Journalize the entries to record the following selected equity investment transactions completed by Perry Company during the current year. Perry accounts for this investment using the fair value method. ​

Define debt securities and equity securities. Include their similarities and differences in your discussion.

As with other assets, the cost of a bond investment includes all costs related to the purchase.

The corporation owning all or a majority of the voting stock of another corporation is known as the parent company.

Held-to-maturity securities are reported on the balance sheet at fair value.