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Exam 26: Investments

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Question 101

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Weston Company had the following stock investments with insignificant influence in its portfolio at December 31,Year 1.Weston had several investment transactions during year 2. (1)Determine the amount Weston should report on its December 31,Year 1 balance sheet for its stock investments. (2)Determine the amount Weston should report on its December 31,Year 2 balance sheet for its stock investments. (3)Prepare the necessary adjusting entry to record the fair value adjustment at December 31,Year 2.

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Question 102

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A company had net income of $350,000 in Year 1 and $520,000 in Year 2.The company had average total assets of $2,500,000 in Year 1 and $3,000,000 in Year 2.Calculate the return on total assets for Year 1 and Year 2.Did the company's performance improve? Explain.

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(a)Year 1: $350,000 / $2,500,000 = 14.0%...

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Question 103

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________ are investments in securities that are not readily convertible to cash,or are not intended to be converted to cash in the short-term.

In the current year,Logic Co.purchased stock of Waterford Co.with a cost of $125,000 and a year-end fair value of $123,700.Logic also purchased 1,500 shares of Jasper Co.common stock with a cost of $25,000 and a year-end fair value of $26,100.These investments are considered stock investments with insignificant influence.Prepare the journal entry to record any necessary fair value adjustment to the stock investments as of its December 31 year-end.

Foreign exchange rates fluctuate due to changes in all but which of the following?

Debt securities are recorded at cost when purchased.

Investments in debt securities that the company actively manages and trades for profit are referred to as short-term debt investments in:

Select the correct statement from the following:

If the exchange rate for Canadian and U.S.dollars is 0.7382 to 1,this implies that 2 Canadian dollars can be purchased for $1.48 U.S.dollars.

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 company reported net income for Year 1 of $98,000 and $106,000 for Year 2.It also reported net sales of $835,000 in Year 1 and $918,000 in Year 2.The company's average total assets in Year 1 were $1,850,000 and $1,720,000 in Year 2.Calculate the company's profit margin,total asset turnover and return on total assets for Year 1 and Year 2.Did the company's return on total assets improve? What component(s)might explain this change?

Barnes Company purchased $50,000 of 8% bonds at par.The bonds mature in six years and are classified as a held-to-maturity security.Which of the following is the correct journal entry to record the receipt of the usual semiannual interest payment?

Carpark Services began operations in 20X1 and maintains long-term investments in available-for-sale debt securities.The year-end cost and fair values for its portfolio of these debt securities follows.The year-end adjusting entry to record the unrealized gain/loss at December 31,20X1 is:

Explain how to account for held-to-maturity debt securities at and after acquisition and how they are reported in the financial statements.

Comprehensive income includes all except:

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

A controlling influence over the investee is based on the investor owning voting stock exceeding:

When consolidated financial statements are prepared,the parent company uses the equity method and reports the subsidiaries as investment accounts on the balance sheet.

McVeigh Corp.owns 40% of Gondor Company's common stock.McVeigh received $41,200 in cash dividends from Gondor.The entry to record the cash dividend received from Gondor would include a:

The two business entities involved in an investment in securities with controlling influence,for which consolidated financial statements are prepared,are known as: