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Exam 15: Investments

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Question 51

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Return on total assets is computed by dividing ________ by ________.

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net income...

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Question 52

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

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Question 53

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Kim Manufacturing purchased on credit £20,000 worth of parts from a British company when the exchange rate was $1.66 per British pound. At the year-end balance sheet date, the exchange rate increased to $1.69. Kim must record a gain of $600.

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

Identify the classifications for non-influential investments in securities.What are the accounting basics for non-influential investments in securities, including acquisition, dividends earned, and disposition?

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:

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

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

On May 1 of the current year, a company paid $200,000 to purchase 7%, 10-year bonds with a par value of $200,000; interest is paid semiannually on May 1 and November 1. The company intends to hold the bonds until they mature. Prepare the journal entries to record (1) the bond purchase, (2) the receipt of the first semiannual interest payment on November 1 of the current year, (3) the accrual of interest for year-end December 31, and (4) the receipt of the second semiannual payment on May 1.

Cloverton Corporation had net income of $30,000, net sales of $1,000,000, and average total assets of $500,000. Its return on total assets is:

A company has net income of $130,500. Its net sales were $1,740,000 and its average total assets were $2,750,000. Its profit margin equals 7.5%.

On January 2, Froxel Company purchased 10,000 shares of Sandia Corp. common stock at $19 per share plus a $3,000 commission. This represents 30% of Sandia Corp.'s outstanding stock. On August 6, Sandia Corp. declared and paid cash dividends of $1.75 per share, and on December 31 it reported net income of $150,000. Prepare the necessary entries for Froxel to account for these transactions and events.

Landmark buys $300,000 of Schroeter Company's 8%, 5-year bonds payable at par value on September 1. Interest payments are made semiannually on March 1 and September 1. The journal entry Landmark should record to accrue interest earned at year-end December 31 is:

If a U.S. company's credit sale to an international customer allows payment to be made in a foreign currency, the sale transaction is recorded using the exchange rate on the date of sale.

FreshFoods, Inc. sells American gourmet foods to merchandisers in Singapore. Prepare the journal entries for FreshFoods, to record the following transactions. Include any year-end adjustments. Dec 20 Sold items to Tan, Inc., for 60,000 Singapore dollars. The exchange rate was $0.476 per Singapore dollar. The purchase terms were n/30. Dec 31 The exchange rate was $0.480 per Singapore dollar. Jan 17 Received payment from Tan for the December 20 sale. The exchange rate was $0.495 per Singapore dollar.

On January 3, Kostansas Corporation purchased 5,000 shares of Morton, Inc. for $40 per share plus $700 in broker commissions. These shares represent a 40% ownership in Morton, Inc. Prepare the journal entry Kostansas Corporation should record for the investment transaction.

If a U.S. company makes a credit sale to a foreign company, the sales price must be translated into dollars as of the date of______ .

Long-term investments in available-for-sale securities are reported at their ________ on the balance sheet.

Scotsland Company had the following transactions relating to investments in trading securities during the year. Prepare the required general journal entries for these transactions. May 4 Scotsland purchased 600 shares of Lobe Company stock at $120 per share plus a $750 brokerage fee. July 1 Scotsland received a $2.50 per share cash dividend on the Lobe Company stock. Sept. 15 Sold 300 shares of Lobe Company stock for $125 per share, less a $450 brokerage fee. Dec. 31 The fair value of the Lobe Company stock (the only investment that Scotsland owns) is $124 per share. The balance of the Fair value Adjustment-Trading account had a zero balance prior to adjustment.

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.