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Exam 15: Investments

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Question 51

Multiple Choice

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The price of one currency stated in terms of another currency is called a(n) :

A) Foreign exchange rate.
B) Currency transaction.
C) Historical exchange rate.
D) International conversion rate.
E) Currency rate.

F) D) and E)
G) A) and B)

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Question 52

Multiple Choice

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A company had net income of $2,660,000,net sales of $25,000,000,and average total assets of $8,000,000.Its return on total assets equals:

A) 3.01%.
B) 10.64%.
C) 32.00%.
D) 33.25%.
E) 300.75%.

F) None of the above
G) A) and B)

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Question 53

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________ securities reflect a creditor relationship while ________ securities reflect an owner relationship.

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:

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

Carpark Services began operations in 20X1 and maintains long-term investments in available-for-sale securities.The year-end cost and fair values for its portfolio of these investments follow.The year-end adjusting entry to record the unrealized gain/loss at December 31,20X1 is: $\begin{array}{|l|l|r|}\hline \text { Available-for-Sale Securities } & \text { Cost } & \text { Fair Value } \\\hline \text { December } 31,20 \mathrm{X} 1 & \$ 250,000 & \$ 241,000 \\\hline \text { December } 31,20 \mathrm{X} 2 & \$ 340,000 & \$ 350,000 \\\hline \text { December } 31,20 \mathrm{X} 3 & \$ 410,000 & \$ 415,00 \mathrm{0} \\\hline\end{array}$

Available-for-sale debt securities are:

Investments in equity securities where the investor has a significant,but not controlling influence,are accounted for using the ________ method.

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

If a long-term investment in an equity security gives the investor significant influence over the investee,the investment is classified as available-for-sale.

An investing company that owns ________ of another (investee)company's voting stock (but not more than 50%)is presumed to have a significant influence over the investee.

Consolidated financial statements show the financial position,results of operations,and cash flows of all entities under the parent's control,including all subsidiaries.

Canberry Corporation had net income of $80,000,beginning total assets of $640,000 and ending total assets of $580,000.Its return on total assets is:

________ refers to all changes in equity for a period except for those due to investments by and distributions to owners.

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.

Consolidated financial statements:

Marjam Company owns 51,000 shares of MacKenzie Company's 100,000 outstanding shares of common stock.MacKenzie Company pays $25,000 in total cash dividends to its shareholders.Marjam's entry to record this transaction should include a:

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.

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.

On October 31,Augustas Co.received cash dividends of $0.15 per share from its investment in Lamb Corp.'s common stock.Augustas owned 1,200 shares of Lamb Corp.'s stock on October 31.The investment is considered available-for-sale.Prepare the investor's journal entry to record the receipt of the cash dividends.