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Exam 15: Investments and International Operations

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Question 31

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Parris Corporation purchased 40% of Samitz Corporation for $100,000 on January 1. On November 17 of the same year, Samitz Corporation declared total cash dividends of $12,000. At year-end, Samitz Corporation reported net income of $60,000. The balance in the Parris Corporation's Long-Term Investment-Samitz account at December 31 should be:

A) $80,800.
B) $100,000.
C) $95,200.
D) $119,200.
E) $124,000.

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

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Question 32

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Investments can be classified as:

A) Held-for-trading securities.
B) Held-to-maturity debt securities.
C) Available-for-sale debt securities.
D) Available-for-sale equity securities.
E) All of these.

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

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Question 33

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

On November 12, Kera, Inc., a U.S. Company, sold merchandise on credit to Kakura of Japan at a price of 1,500,000 yen. The exchange rate was $0.00837 on the date of sale. On December 31, when Kera prepared its financial statements, the exchange rate was $0.00843. Kakura paid in full on January 12, when the exchange rate was $0.00861. On January 12, Kera should prepare the following journal entry:

Rosser Company sold supplies in the amount of 25,000 euros to a French company when the exchange rate was $1.21 per euro. At the time of payment, the exchange rate decreased to $0.82. Rosser must record a:

The currency in which a company presents its financial statements is known as the:

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) :

Long-term investments include investments in land or other assets not used in a company's operations.

Investments in held-to-maturity debt securities are always current assets.

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.

Investments in held-for-trading securities are accounted for using the consolidation method.

On March 15, Carter Company purchased 10,000 Tonya Corp. shares for $35,000. The investment is classified as available-for-sale securities. On June 30, the shares had a fair value of $38,000. Carter should do all of the following except:

Schoodic Company had the following long-term available-for-sale securities in its portfolio at December 31 for each of the years listed. The year-end cost and fair values for its portfolio follow. Beginning with Year 1, prepare the appropriate journal entry to record each year-end market adjustment for these securities.

A company had net income of $43,000, net sales of $380,500, and average total assets of $220,000. Its profit margin and total asset turnover were, respectively:

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

Savan Co. purchased 14,000 Briton Corporation's 40,000 ordinary shares on January 1. This represented 35% of Briton's outstanding shares and gave Savan Co. significant influence over Briton's management and operations. On October 11, Briton declared and paid cash dividends of $30,000. On December 31, Briton reported net income of $125,000 for the year. Prepare the journal entries Savan Co. should record to account for the dividends received and the earnings reported by Briton Corporation.

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

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

Held-for-trading securities are securities that are purchased by trading other securities rather than by paying cash.

A control over the investee is based on the investor owning voting shares exceeding: