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Exam 16: Investments

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Question 51

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At the end of an accounting period if the fair value of the trading portfolio is less than its cost then the company should recognize an ______________ which is reported on the _________________.

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unrealized...

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Question 52

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On April 1 Sign Company buys 4000 shares of Polk common stock for $61500. On October 1 Sign sells 1000 shares of Polk stock for $20500.. Instructions Prepare journal entries for the purchase and sale of the Polk common stock.

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Question 53

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Consolidated financial statements are prepared when a company owns _________ of the common stock of another company.

The following transactions were made by Allen Company. Assume all investments are short-term and are readily marketable. June 2 Purchased 400 shares of Snoop Corporation common stock for $45 per share. July 1 Purchased 200 Barr Corporation bonds for $228000. 30 Received a cash dividend of $1.50 per share from Snoop Corporation. Sept. 15 Sold 120 shares of Snoop Corporation stock for $50 per share. Dec. 31 Received semiannual interest check for $13000 from Barr Corporation. 31 Received a cash dividend of $2 per share from Snoop Corporation. Instructions Journalize the transactions.

On January 1 2017 Dumas Industries acquired a 18% interest in Arlongton Corporation through the purchase of 12000 shares of Arlongton Corporation common stock for $250000. During 2017 Arlongton Corp. paid $60000 in dividends and reported a net loss of $90000. Dumas is able to exert significant influence on Arlongton. However Dumas mistakenly records these transactions using the cost method rather than the equity method of accounting. Which of the following would show the correct presentation for Dumas's investment using the equity method? $\begin{array}{l}&&\text { Investment Net }\\& \text { Account } & \text { Earnings (loss) } \\\end{array}$ A) $\begin{array}{l}& \$ 90,000 && ( \$ 30,000 ) \\\end{array}$ B) $\begin{array}{l}& \$ 223,000 && ( \$ 16,200 ) \\\end{array}$ C) $\begin{array}{l}& \$ 233,800 && ( \$ 16,200 ) \\\end{array}$ D) $\begin{array}{l} & \$ 233,800 && ( \$ 5,400 )\end{array}$

Blaine Company had these transactions pertaining to stock investments: Feb. 1 Purchased 2000 shares of Horton Company (10%) for $51000 cash. June 1 Received cash dividends of $2 per share on Horton stock. Oct.1 Sold 1200 shares of Horton stock for $32400. The entry to record the purchase of the Horton stock would include a

If the equity method is being used the Revenue from Stock Investments account is

Debt investments are recorded at the

In accordance with the historical cost principle brokerage fees should be added to the cost of an investment.

On January 1 2017 Mink Company purchased 5000 shares of Kusher Company stock for $360000. Mink's investment represents 30 percent of the total outstanding shares of Kusher. During 2017 Kusher paid total dividends of $100000 and reported net income of $300000. What revenue does Mink report related to this investment and what is the amount to be reported as an investment in Kusher stock at December 31?

When recording bond interest Interest Receivable is reported as a fixed asset in the balance sheet.

On January 1 2017 Brenner Company purchased at face value a $1000 8% bond that pays interest on January 1. Brenner Company has a calendar year end. The adjusting entry on December 31 2017 is a. not required. b. $\begin{array}{llr} \text { Cash } &80\\ \text { Interest Revenue } &&80\\\end{array}$ c. $\begin{array}{llr} \text { Interest Receivable } &80\\ \text { Interest Revenue} &&80\\\end{array}$ d. $\begin{array}{llr} \text { Interest Receivable } &80\\ \text { Debt Investments } &&80\\\end{array}$

On January 2 Angle Corporation acquired 40% of the outstanding common stock of Bobbe Company for $550000. For the year ended December 31 Bobbe reported net income of $90000 and paid cash dividends of $30000 on its common stock. At December 31 the carrying value of Angle's investment in Bobbe under the equity method is

Unrealized gains and losses related to available-for-sale/non-trading equity investments are reported in other comprehensive income under

Roxy Corporation makes a short-term investment in 180 shares of Sager Company's common stock. The stock is purchased for $53 a share. The entry for the purchase is a. $\begin{array}{llr} \text { Debt Investments } &9,540\\ \text { Cash } &&9,540\\\end{array}$ b. $\begin{array}{llr} \text { Stock Investments } &9,540\\ \text { Cash } &&9,540\\\end{array}$ c. $\begin{array}{llr} \text { Stock Investments } &9,047\\ \text { Cash } &&9,047\\\end{array}$ d. $\begin{array}{llr} \text { Stock Investments } &9,000\\ \text { Cash} &&9,000\\\end{array}$

In accounting for stock investments of less than 20% the equity method is used.

When bonds are sold the gain or loss on sale is the difference between the

When a company holds stock of several different corporations the group of securities is identified as a(n)

Presented below are two independent situations. 1. Guo Cosmetics acquired 10% of the 200000 shares of common stock of Chy Fashion at a total cost of $12 per share on March 18 2017. On June 30 Chy declared and paid a $50000 dividend. On December 31 Chy reported net income of $110000 for the year. At December 31 the market price of Chy Fashion was $15 per share. The stock is classified as available-for-sale. 2. Liptin Inc. obtained significant influence over Blurr Corporation by buying 25% of Blurr 50000 outstanding shares of common stock at a total cost of $7 per share on January 1 2017. On June 15 Blurr declared and paid a cash dividend of $40000. On December 31 Blurr reported a net income of $90000 for the year. Instructions Prepare all the necessary journal entries for 2014 for (a) Guo Cosmetics and (b) Liptin Inc.

Pincher Company purchased 50 Issac Company 12% 10-year $1000 bonds on January 1 2017 for $50000. The bonds pay interest semiannually on January 1. On January 1 2018 after receipt of interest Pincher Company sold 30 of the bonds for $28300. Instructions Prepare the journal entries to record the transactions described above.