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Exam 15: Investments and International Operations

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Question 51

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A U.S.company's credit sale to an international customer to be paid in a foreign currency requires using the same exchange rate for the date of sale and the cash payment date.

A) True
B) False

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Question 52

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A long-term investment classified as equity securities with controlling influence implies that the investor can exert a controlling influence over the investee.

A) True
B) False

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Question 53

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Net profit margin reflects the percent of net income in each dollar of net sales.

IFRS requires uniform accounting policies to be used throughout the group of consolidated subsidiaries.

Parris Corporation purchased 40% of Samitz Corporation for $100,000 on January 1.On November 17 of the same year,Samitz Corporation declared total cash dividends of $12,000.At year-end,Samitz Corporation reported net income of $60,000.The balance in the Parris Corporation's Long-Term Investment in Samitz Corporation at December 31 should be:

Equity securities reflect a creditor relationship such as investments in notes,bonds,and certificates of deposit.

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

On April 1 of the current year,a company paid $150,000 to purchase 7%,10-year bonds that had a par value of $150,000 and paid interest semiannually on October 1 and April 1.The company intends to hold the bonds until they mature.Prepare the journal entry to recognize accrued interest as of December 31 of the current year.

Trading securities,held-to-maturity debt securities,and equity securities giving an investor significant influence over an investee are always considered short-term investments.

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

Long-term investments:

Savan Co.purchased 14,000 shares of Briton Corporation's 40,000 shares of common stock on December 31,2012.This represented 35% of Briton's outstanding shares and gave Savan Co.significant influence over Briton's management and operations.On October 11,2013,Briton declared and paid cash dividends of $30,000.On December 31,2013,Briton reported net income of $125,000 for the year.Prepare the journal entries Savan Co.should record to account for its investment in Briton Corporation during 2013.

A company purchased $60,000 of 5% bonds on May 1.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:

Marina,Inc.,held 1,500 of Navia common stock with a cost of $36,900.These shares were classified as a long-term available-for-sale investment.It sold the shares on December 13 for $42,100.Prepare the necessary journal entry to record this sale.

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

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

To prepare consolidated financial statements when a company has an international subsidiary,the international subsidiary's financial statements must be translated into U.S.dollars.

Match the following terms with the appropriate definitions:

Chrono Co.held bonds of Ayrford Co.with a cost of $125,000 and a year-end market value of $123,700.Chrono also held 1,500 shares of Avian common stock with a cost of $25,000 and a year-end market value of $26,100.These are classified as long-term available-for-sale securities.Prepare the journal entry to record the market value of the investments as of its December 31 year-end.

Six months ago,a company purchased an investment in stock for $65,000.This investment is considered available-for-sale.The current market value of the stock is $68,500.The company should record a: