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Exam 15: Investments and International Operations

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Question 61

Multiple Choice

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Held-to-maturity securities are:

A) Always classified as Short-Term Investments.
B) Always classified as Long-Term Investments.
C) Debt securities that a company intends and is able to hold to maturity.
D) Equity securities that a company intends and is able to hold to maturity.
E) Equity securities where significant influence involved.

F) A) and B)
G) A) and C)

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Question 62

Multiple Choice

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A company paid $37,800 plus a broker's fee of $525 to acquire 8% bonds with a $40,000 maturity value as a long-term investment.The company intends to hold the bonds to maturity.The correct entry to record the purchase of the bond investment is:

A) Debit Long-Term Investments-HTM $37,800;credit Cash $37,800.
B) Debit Long-Term Investments-HTM $38,325;credit Cash $38,325.
C) Debit Cash $40,000;credit Long-Term Investments-HTM $40,000.
D) Debit Long-Term Investments-HTM $37,800;debit Investment Expense $525;credit Cash $38,325.
E) Debit Long-Term Investments-HTM $37,800;debit Loss on Investment $525;credit Cash $38,325.

F) A) and C)
G) A) and E)

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Question 63

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In the current year,Logic Co.purchased bonds 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 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.

Landmark buys $300,000 of Schroeter Company's 8% five-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:

Short-term investments:

In the current year,Largo Co.purchased bonds of MacDermott Corp.with a cost of $125,000 and a market value of $127,000.Largo also purchased 1,500 shares of Armistead common stock with a cost of $25,000 and a market value of $24,700.These are classified as long-term available-for-sale securities.Prepare the journal entry to record the market value of the investments as of December 31.

All of the following statements regarding accounting for noninfluential securities under U.S.GAAP and IFRS are true except:

_________________________ securities reflect a creditor relationship while ____________________ securities reflect an owner relationship. answers must appear in this order

Long-term investments are reported in the:

Any unrealized gain or loss for the portfolio of available-for-sale securities is reported on the income statement in the other gain or loss section.

Foreign exchange rates fluctuate due to changing _______________ and ___________ conditions. Answers can appear in any order.

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

Return on total assets is computed by dividing ___________ by __________. Answers can appear in any order.

___________________________ are investments in securities that management intends to convert to cash within the longer of one year or the operating cycle,and are readily convertible to cash.

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

Lessington Corporation purchases 4,000 shares of Gonzalez Company common stock for $150,000 as a long-term investment.The investment is classified as available-for-sale securities.Gonzalez has 500,000 shares of stock currently outstanding and the par value of the stock is $1 per share.Lessington's entry to record the purchase transaction would include a:

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.

Barnes Company holds $50,000 of 8% bonds that mature in six years as a held-to-maturity security.Which of the following is the correct journal entry to record the receipt of the semiannual interest payment?

Washington Corp.held 1,500 of Vashon Company common stock with a cost of $74,387.These shares were classified as a Long-Term available-for-sale investment.It sold the shares on December 13 for $55,275.Prepare the journal entry to record Washington's sale.

All of the following statements relating to accounting for international operations are true except: