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Exam 15: Investments and International Operations

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Question 91

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An investing company that owns more than ________ of another (investee) company's voting stock is presumed to have controlling influence over the investee.

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Question 92

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Seamark buys $300,000 of Eider's 8% five-year bonds payable at par value. Interest payments are made semiannually. Seamark plans to hold the bonds for the five year life. The journal entry to record the purchase should include:

A) A debit to Long-Term Investments-AFS $300,000.
B) A debit to Short-Term Investments-Trading $300,000.
C) A debit to Long-Term Investments-HTM $300,000.
D) A debit to Short-Term Investments-AFS $300,000.
E) A debit to Cash $300,000.

F) A) and D)
G) C) and D)

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Question 93

Multiple Choice

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Available-for-sale equity securities:

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

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

Seamark buys $300,000 of Eider's 8% five-year bonds payable at par value. Interest payments are made semiannually. All of the following regarding accounting for the securities are True except:

Brown Company sold supplies in the amount of 15,000 euros to a French company when the exchange rate was $1.15 per euro. At the time of payment, the exchange rate decreased to $1.12. Brown must record a loss of $450.

Net profit margin reflects the percent of net income in each dollar of net sales.

Micron owns 30% of JVT stock. Micron received $6,500 in cash dividends from its investment in JVT. The entry to record receipt of these dividends includes a debit to Cash for $6,500 and a credit to Long-Term Investments for $6,500.

Six months ago, a company purchased an investment in stock for $65,000. The investment is classified as available-for-sale securities. The current fair value of the stock is $68,500. The company should record a:

Columbia Corp. held 1,500 of Vianco 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 this sale.

On February 15, Seacroft buys 7,000 shares of Kebo common stock at $28.53 per share plus a brokerage fee of $400. The stock is classified as available-for-sale securities. On March 15, Kebo declares a dividend of $1.15 per share payable to stockholders of record on April 15. Seacroft received the dividend on April 15 and ultimately sells half of the Kebo stock on November 17 of the current year for $29.30 per share less a brokerage fee of $250. The journal entry to record the sale of the stock on November 17 is:

Trading securities are always reported as current assets.

Chrono Co. held bonds of Ayrford Co. with a cost of $125,000 and a year-end fair value of $123,700. Chrono also held 1,500 shares of Avian 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.

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

On February 15, Seacroft buys 7,000 shares of Kebo common stock at $28.53 per share plus a brokerage fee of $400. The stock is classified as available-for-sale securities. On March 15, Kebo declares a dividend of $1.15 per share payable to stockholders of record on April 15. Seacroft received the dividend on April 15 and ultimately sells half of the Kebo stock on November 17 of the current year for $29.30 per share less a brokerage fee of $250. The fair value of the remaining shares is $29.50 per share. The amount that Seacroft should report on its year-end December 31 income statement related to the investment in Kebo is:

Clark Corporation purchased 40% of IT Corporation for $125,000 on January 1. On May 20 of the same year, IT Corporation declared total cash dividends of $30,000. At year-end, IT Corporation reported net income of $150,000. The balance in Clark Corporation's Long-Term Investment-IT Corporation account as of December 31 should be:

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

A decrease in the fair value of a security that has not yet been realized through an actual sale of the security is called a(n) :

Multinational corporations can be U.S. companies with operations in other countries.